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Nearly half of middle-class Americans face a slide into poverty as they enter their retirement, a recent study by the Schwartz Center for Economic Policy Analysis at the New School has concluded. That risk has been driven by depressed earnings, depressed asset values and increased health-care costs — causing 74 percent of Americans planning to work past traditional retirement age. Additionally, both private and public pension plans have been allowed to become seriously underfunded. So what can be done? Fundamental changes in the structure of the U.S. economy, combined with increased health-care costs and lack of saving, have created a financial trap for millions of American workers heading into retirement.

Roughly 40 percent of Americans who are considered middle class (based on their income levels) will fall into poverty or near poverty by the time they reach age 65, according to the study. The study also concluded that if workers age 50 to 60 decide to retire at age 62, 8.5 million of them are projected to fall below twice the Federal Poverty Level, with retirement incomes below $23,340 for singles and $31,260 for couples. Further, 2.6 million of those 8.5 million downwardly mobile workers and their spouses will have incomes below the poverty level — $11,670 for an individual and $15,730 for a two-person household.

Forget about the high-tech military challenges from China and Russia, the Pentagon is facing a fast-growing national security threat that could be even trickier to tackle: America’s obesity crisis. A study released this week has found that nearly one-third of young Americans are now too overweight to join up, a worrying statistic for military officials already facing recruitment challenges. “Obesity has long threatened our nation’s health. As the epidemic grows, obesity is posing a threat to our nation’s security as well,” the Council for a Strong America states in its new report. The Army last month announced it would miss its goal of attracting 76,500 new recruits in 2018. The shortfall is of about 6,500 soldiers — the first time since 2005 the service had missed its hiring targets.

A strong US economy and tight jobs market played a role, but the numbers highlight the dwindling pool of applicants the Pentagon has to draw from. According to the Defense Department, obesity is one of the top reasons why a stunning 71 percent of Americans aged 17-24 do not meet the military’s sign-up requirements. “Given the high percentage of American youth who are too overweight to serve, recruiting challenges will continue unless measures are taken to encourage a healthy lifestyle beginning at a young age,” states the study, entitled “Unhealthy and Unprepared.”

Despite the recent angst in the market over increasing interest rates, there has been little evidence of concern by investors overall. A recent report showed that investors have the LEAST amount of cash in their investment accounts…EVER. “Individual investors drew down cash balances at brokerage accounts to record lows as the S&P 500 surged 7.2 percent in the three months ended Friday. Cash as a percentage of assets among Charles Schwab Corp. clients in August fell to 10.4 percent, matching the level in January that marked the lowest since at least 2004.” Of course, eight months ago the markets suffered a 10.4% decline just as investors scrambled to “get in.”

The monthly survey from the American Association of Individual Investors shows the same. Individuals are carrying some of the highest levels in history of equities, are reducing their exposure to bonds, and carrying very low levels of cash. As Dana Lyons recently noted: ” From the Federal Reserve’s Z.1 release, we find that U.S. Households had a reported 34.3% of their financial assets invested in the equity market as of the 2nd quarter. Outside of a slightly higher reading in the 4th quarter of 2017, that is the highest level of stock investment in the 70-plus year history of the series, other than the 1999-2000 bubble top.”

The pastor who was at the center of a diplomatic spat between Turkey and the United States will land at a military base near Washington on Saturday and will likely visit the White House the same day, President Donald Trump said on Friday. “We’re very honored to have him back with us,” Trump told reporters, referring to the release of pastor Andrew Brunson by a Turkish court. “He suffered greatly but we’re very appreciative to a lot of people,” Trump added, saying no deal had been made with Turkey on lifting U.S. sanctions in exchange for Brunson’s release.

Earlier Friday, a Turkish court convicted Brunson of terror links but released him from house arrest and allowed him to leave the country, removing a major irritant in fraught ties between two NATO allies that still disagree on a host of other issues. The court near the western city of Izmir sentenced North Carolina native Brunson to just over three years in prison for allegedly helping terror groups, but let him go because the 50-year-old evangelical pastor had already spent nearly two years in detention. An earlier charge of espionage was dropped.

Saudi Arabia has found itself further isolated over the disappearance of Jamal Khashoggi after the business world turned its back on a high-profile investment conference in the kingdom and US officials claimed audio and video recordings had captured the moment the journalist was murdered in Istanbul. The Future Investment Initiative conference, to be held in Riyadh later this month, was rapidly turning into a fiasco on Friday after most media partners and several top business allies pulled out. More were expected to follow. All said they had been disturbed by the circumstances of Khashoggi’s disappearance from the Saudi consulate in Turkey and the lack of credible responses.

Saudi Arabia has been under pressure to explain what happened to Khashoggi after he entered the consulate building at 1.14pm on 2 October. Turkey has claimed the exiled journalist and critic of Crown Prince Mohammed bin Salman was murdered by a hit squad sent from Riyadh. Authorities in Istanbul have hinted they hold undisclosed evidence that proves what took place. On Friday, US officials revealed to Khashoggi’s employer, the Washington Post, that Turkish investigators had claimed audio and video tapes existed of conversations between the missing 59-year-old and his alleged killers. “You can hear his voice and the voices of men speaking Arabic,” an official said. “You can hear how he was interrogated, tortured and then murdered.”

The references to recordings could suggest that Turkish intelligence officers had bugged the consulate or some of the accused killers. Hatice Cengiz, Khashoggi’s Turkish fiancee, told the Associated Press on Friday that Khashoggi was wearing an Apple watch when he entered the consulate and investigators were examining his cellphones, which he had left with her. In written responses to questions by the AP, Cengiz said Turkish authorities had not told her about any recordings and that Khashoggi was officially “still missing”. Cengiz said Khashoggi was not nervous when he entered the Saudi consulate in Istanbul and did not suspect anything bad would happen to him. “He said ‘See you later my darling’ and went in,” Cengiz said, and they were his last words to her.

UK officials have begun drawing up a list of Saudi security and government officials who could potentially come under sanctions pending the outcome of investigations into the disappearance of dissident journalist Jamal Khashoggi, a source close to both Riyadh and London told The Independent. The list being drawn up by the Foreign and Commonwealth Office could be used in case the UK decides to invoke the “Magnitsky amendment,” passed this year, which allows Britain to impose sanctions on foreign officials accused of human rights violations, or to apply restrictions on Saudi trade and travel in coordination with the European Union.

Asked to confirm or deny the drawing up of the list, the Foreign Office said it “had nothing to add” to the Khashoggi matter other than comments the foreign secretary, Jeremy Hunt, made on Thursday. “Across the world, people who long thought themselves as Saudi’s friends are saying this is a very, very serious matter,” said Mr Hunt. “If these allegations are true there would be serious consequences.” The source, a former government advisor, told The Independent they were briefed by a UK intelligence official and others. “Initially this was a position-paper scenario,” the source said. “Now it is definitely being looked at as a real possibility.”

Former US diplomat Jim Jatras and investigative journalist Rick Sterling tell RT what could happen if allegations that the Gulf monarchy, headed by Saudi crown prince Mohammed bin Salman, is behind the plot prove to be true. If Saudi Arabia is found to be complicit in Khashoggi’s disappearance, Sterling believes “the pressure will be on [Turkish president] Erdogan and Turkey to escalate.” “Saudi Arabia effectively abducted Lebanese Prime Minister [Saad] Hariri and he appeared in Riyadh, resigned – supposedly – and then it turned out he was coerced in some form or manner,” Sterling added. “The Saudi government is extreme, it’s bizarre and we’ll have to see how the facts develop in this case but it points towards the instability of that government that beheads hundreds of citizens a year.”

However, he adds, the Saudi regime has been “an extremely close ally of the US and Israel. This would be a huge earthquake in international relations if the calls for a serious reduction in relations continues.” Despite the years of brutality against their own people, Khashoggi’s disappearance seems to have ushered the Saudi regime’s reckless violence into the global spotlight, Jatras told RT. “Saudi Arabia is usually immune from criticism from the American establishment, They can destroy Yemen, they can cut people’s heads off… and suddenly over one journalist everyone is outraged; We discover that Saudi Arabia is an oppressive regime that kills people,” Jatras said, adding that the sudden attention “seems very strange” considering the “bloody murder that the Saudis have gotten away with for decades.”

Brexit is unusual as a game of poker, in that one side folded long ago but has still not revealed its losing hand. For months, the EU has insisted that Theresa May’s only options for a deal would lead to either a soft Brexit for the whole UK, or a sea border between Great Britain and Northern Ireland. For months, critics have challenged the government to spell out which of these two ostensibly intolerable concessions it intends to make. Now it seems we know. The prime minister will concede both. Capitulating to Brussels will be the easy part. After that, May will have to lie to the hard Brexiters, bully the Tory remainers, and call the bluff of the Democratic Unionist party. As the Brexit circus enters its final month, here is its tightrope.

First, Brussels. The EU’s offer springs from its immutable and non-negotiable red lines: to preserve the single market, the Good Friday agreement, and Ireland’s invisible border. Only two outcomes can satisfy all those requirements: the whole UK remains in the whole single market and customs union, or Northern Ireland stays in the customs union and single market in goods while Great Britain diverges. May has decided to mix and match those outcomes. It appears the whole UK will remain in the customs union, so there are no tariff divergences or checks either on the island of Ireland or within the United Kingdom. And Great Britain will leave the single market, thus necessitating “de-dramatised” regulatory checks on goods crossing the Irish Sea.

May’s surrender is not in doubt. Neither is the resistance to this deal from all opposition parties. Consequently, the prime minister’s only task is to fool or blackmail her MPs into supporting it. Her most pressing duty will be to hoodwink the parliamentary hardliners in thrall to Boris Johnson and Jacob Rees-Mogg. May will attempt this ambitious deception principally by insisting that the permanent customs union will in fact be temporary. It will not.

Millions of consumers could face “immediate” and “catastrophic” consequences in the event of a no-deal Brexit, the watchdog Which? has said. The consumer group said the government’s preparations for a no-deal exit suggested a reduction in consumer rights and choice as well as price hikes that would have a “direct and hard” impact in areas ranging from travel to food and energy. The watchdog, which based its conclusions on its assessment of the government’s technical notices in preparation for the event of a no-deal Brexit, online forums and surveys, said two in five people did not understand the potential implications of a no-deal scenario.

In its report – Brexit no deal: a consumer catastrophe? – Which? says: “Our latest consumer research shows that most people are unprepared for what ‘no deal’ would mean in practice – and many do not understand how it would have multiple impacts across so many aspects of their daily lives. “When the everyday repercussions and government’s plans on issues such as food and medical supplies were explained to people in our research, many people were shocked and questioned why they had not been made aware of the implications sooner.”

Angela Merkel’s conservative allies in the German state of Bavaria are facing losses in regional elections as liberal-minded voters defect to the Greens. The Christian Social Union, which has enjoyed six decades of dominance in the state, is predicted to suffer heavy losses in the vote on 14 October. The party is part of Germany’s grand coalition with its sister party, Ms Merkel’s Christian Democrats (CD) and the centre-left Social Democrats (SDP). A Forschungsgruppe Wahlen poll predicted the CSU could lose up to 14 percentage points in the upcoming elections as voters flock to the pro-immigration Greens.

Support for the CSU stood at 34 per cent, compared to the 48 per cent it won in the last regional election in 2013. The Greens appear poised to overtake the Social Democrats (SPD) to become Bavaria’s second-largest party, with up to 19 per cent of the vote, an increase of 10 percentage points since the last elections. If the polls are correct, the Greens could become a potential coalition partner for the CSU in Bavaria. The polls also showed the anti-immigration Alternative for Germany (AfD) party on 11 per cent, which would be enough to enter the Bavarian state parliament for the first time.

The first step is that of transforming the ESM into a kind of European replacement for the IMF. The IMF played a central role in Greece during the crisis, but there were often clashes over the best way to help the country. In the future, the IMF does not intend to participate in state bankruptcies in Europe. For the ESM to function as a European IMF, the organization is to be granted oversight rights to look over the individual finances of eurozone member states. Should a new crisis crop up, the ESM would be armed with additional control and enforcement rights.

[..] One of the ESM’s new tasks is ringing the alarm bells early when there are signs of an approaching crisis. The ESM possess a deep knowledge of the financial situations of former crisis countries, in part because analysts tag along when donor state representatives visit those countries’ capitals. The organization also knows a lot about larger member states like Germany and France, Regling says. “But if, purely hypothetically, something were to happen in, say, Austria or Malta, we would currently be at a loss.” To fulfill its role as an early-warning system, the ESM must recruit experts on all member countries. A larger staff is also needed for the ESM’s second area of operation. In the future, the plan is for the ESM to provide financial backing for the European mechanism for the resolution of failing credit institutions. For this, Regling needs banking experts.

The ESM will also receive a set of new financial instruments geared toward helping ailing countries quickly. A precautionary line of credit is in discussion that could be extended to countries not yet in acute need but which require help to calm wary investors. In a paper for the Eurogroup, as the board of eurozone finance ministers is known, the ESM also proposes another instrument. It would provide short-term liquidity assistance to countries that have temporarily run out of money because they have unfairly landed in speculators’ crosshairs. “These funds would be paid out without a big fuss, and the country wouldn’t have to subject itself to a complete adjustment program,” the paper reads.

Here’s what interesting about this: the two soldiers, who had been in detention for almost half a year for accidentally stepping across the border, were released by a provincial court, and get back home on a Greek national holiday (August 15). On that same day, another court decides that an appeal for pastor Brunson is denied. Ergo, Erdogan can claim the latter’s fate is out of his hands: it’s the court system that decides. That victory over Trump is worth more to him than the defeat of not exchanging the soldiers for the 8 Turkish servicemen who have aylum in Greece.

Two Greek soldiers freed after months in a Turkish prison returned to Greece by government jet early Wednesday after their unexpected release by a provincial court. Defense Minister Panos Kammenos said he phoned his Turkish counterpart to express his satisfaction with the soldiers’ release and invite him to visit Greece. “This is a great day for our motherland, the day of Our Lady, the day of Tinos in 1940,” Kammenos told reporters, referring to the Feast of the Dormation, which falls on August 15 and to the Italian torpedoing on a Greek warship on this day in 1940. “I hope that their release … will herald a new day in Greek-Turkish relations. We can live together peacefully, for the benefit of both our peoples.”

The soldiers – 2nd Lieutenant Angelos Mitretodis and Sergeant Dimitris Kouklatzis – were met by Kammenos, the army chief of staff and an honor guard after their arrival at 3 a.m. at the airport in the northern city of Thessaloniki. “All I want to say is thank you,” Mitretodis told reporters. The men were arrested on March 1 for illegally entering Turkey after crossing the heavily militarized land border. Greece strongly protested their long detention in the western town of Edirne, arguing that they had strayed across during a patrol of a trail of suspected illegal immigration amid poor visibility due to bad weather.

[..] The men’s arrest had considerably strained Greek-Turkish relations. Kammenos had claimed that they were being held “hostage” by Turkey, which is trying to secure the extradition of eight Turkish servicemen who fled to Greece after the 2016 failed military coup in Turkey. Ankara accuses its servicemen of involvement in the coup, but Greek courts have refused to extradite them, arguing they would not get a fair trial in Turkey and their lives would be in danger there.

Turkey’s currency crisis was easy to predict. What is more surprising is how weak the global response has been. The old world financial order is badly missed. A big mess was almost certain to arrive in a country that continually relied on short-term loans to finance a large current account deficit. That was not the only invitation to disaster. Heavy domestic borrowing denominated in foreign currencies and high inflation added to the strains. So did a government that spurned the counsel of the foreign financiers who help keep the economy afloat. President Tayyip Erdogan was lucky to avoid serious trouble so far. Now, though, he faces a disaster. The Turkish lira has fallen 42% against the dollar since the beginning of May. It will take a miracle or an international rescue to avoid a domestic banking crisis.

Much has changed since 2009 when the government, then led by Prime Minister Erdogan, announced that it no longer needed advice from the IMF. The country would “move forward without a walking stick”. Turkey had leaned heavily on the IMF crutch over preceding decades. The country had a standby arrangement with the global lender for more than half the period between 1970 and 2009. The IMF promised support if the government kept working on economic reforms. This time, however, the IMF is still waiting for a phone call from Ankara. The Washington-based institution has the expertise and probably the money needed to stabilise the lira, but Erdogan has cast it in the role of enemy of the Turkish people.

The antipathy fits with the president’s nationalist and authoritarian agenda, but it is also part of a distressing pattern. The traditional authority figures in global financial matters are crippled. The IMF’s reputation has been damaged by what was widely perceived as its blind allegiance to the doctrines of free trade, free capital movements and free markets. Though the multilateral institution’s approach has softened under Christine Lagarde, managing director since 2011, Turkey’s intransigence suggests the IMF lacks its former moral authority.

Turkey is hiking tariffs on imports of certain US products in response to American sanctions on Ankara that caused the value of the lira to plunge, a decree published Wednesday said. Turkish Vice President Fuat Oktay said that the rises were ordered “within the framework of reciprocity in retaliation for the conscious attacks on our economy by the US administration”. The hikes were published in Turkey’s Official Gazette in a decree signed by President Recep Tayyip Erdogan. The move comes after US President Donald Trump announced that the United States was doubling steel and aluminium tariffs on Turkey, as the two NATO allies row over the detention by Turkish authorities of American pastor Andrew Brunson.

The tensions and the tariff hike by the United States have caused the Turkish lira to bleed value, fanning fears the country is on the verge of an economic crisis that could spillover into Europe. Erdogan has repeatedly described the crisis as an “economic war” that Turkey will win. The tariff increases amount to a doubling of the existing rate, the state-run Anadolu news agency said, in an apparent parallel response to Trump’s move. The decree said the move brought tariffs to 50% on imports of US rice to 140% on hard alcoholic drinks like spirits, 60% in leaf tobacco and 60% on cosmetics. The tariffs on auto imports are now up to 120% depending on the type of vehicle.

Americans’ borrowing reached $13.29 trillion in the second quarter, up $454 billion from a year ago, marking a 16th consecutive quarter of increases, a New York Federal Reserve report released on Tuesday showed. The level of U.S. consumer debt was $618 billion higher than the previous peak of $12.68 trillion in the third quarter of 2008. It was 19.2% above a post global credit crisis low set in the second quarter of 2013, the New York Fed said. The ongoing growth in home, auto, student and credit loans has been linked with a solid labor market. The rise in indebtedness did not make it more difficult for borrowers to meet their monthly payments last quarter.

The rate on seriously delinquent loans, or those that are 90 days or more past due, was 2.3% in the second quarter, unchanged from the prior quarter. Notably, the pace of student loans turning seriously delinquent slowed to 8.6% from 8.9%, the N.Y. Fed survey showed. “While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student loan over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans,” Wilbert van der Klaauw, senior vice president at the New York Fed, said in a statement.

There’s a new scandal quietly unfolding in Washington. It’s far bigger than Housing Secretary Ben Carson buying a $31,000 dinette set for his office, or former EPA chief Scott Pruitt deploying an aide to hunt for a deal on a used mattress. It involves the world’s richest man, President Trump’s favorite general, and a $10 billion defense contract. And it may be a sign of how tech giants and Silicon Valley tycoons will dominate Washington for generations to come. The controversy involves a plan to move all of the Defense Department’s data—classified and unclassified—on to the cloud. The information is currently strewn across some 400 centers, and the Pentagon’s top brass believes that consolidating it into one cloud-based system, the way the CIA did in 2013, will make it more secure and accessible.

That’s why, on July 26, the Defense Department issued a request for proposals called JEDI, short for Joint Enterprise Defense Infrastructure. Whoever winds up landing the winner-take-all contract will be awarded $10 billion—instantly becoming one of America’s biggest federal contractors. But when JEDI was issued, on the day Congress recessed for the summer, the deal appeared to be rigged in favor of a single provider: Amazon. According to insiders familiar with the 1,375-page request for proposal, the language contains a host of technical stipulations that only Amazon can meet, making it hard for other leading cloud-services providers to win—or even apply for—the contract. One provision, for instance, stipulates that bidders must already generate more than $2 billion a year in commercial cloud revenues—a “bigger is better” requirement that rules out all but a few of Amazon’s rivals.

What’s more, the process of crafting JEDI bears all the hallmarks of the swamp that Trump has vowed to drain. Though there has long been talk about the Defense Department joining the cloud, the current call for bids was put together only after Defense Secretary James Mattis hired a D.C. lobbyist who had previously consulted for Amazon. The lobbyist, Sally Donnelly, served as a top advisor to Mattis while the details of JEDI were being hammered out. During her tenure, Mattis flew to Seattle to tour Amazon’s headquarters and meet with Jeff Bezos. Then, as the cloud-computing contract was being finalized, Donnelly’s former lobbying firm, SBD Advisors, was bought by an investment fund with ties to Amazon’s cloud-computing unit.

At a bill signing ceremony in New York on Monday, President Donald Trump took credit for a $716 billion defense policy bill that he said would strengthen America’s military. “I am very proud to be a big, big part of it,” he said. “It was not very hard.” In a written statement hours later, Trump raised objections to 52 provisions of the law – including four of the eight provisions dealing specifically with Russia. The signing statement suggests he may not enforce provisions that he said raise constitutional concerns. As passed by Congress, the defense bill attempts to tie the president’s hands on Russia in a number of ways. It forbids him from using federal funds to recognize Russian control over Crimea and bans military cooperation with Russia until Russia pulls out of Ukraine.

It requires him to report back to Congress on steps he has taken to address Russian violations of the Open Skies Treaty, which allows reconnaissance flights over Russian territory, and the New START Treaty on nuclear weapons. Trump said those provisions undermine the president’s role “as the sole representative of the nation in foreign affairs.” Trump objected to a section requiring him to send to Congress a strategy to combat “malign foreign influence operations and campaigns.” That strategy, he said, is covered by executive privilege. Though presidential objections in signing statements are not uncommon, Trump’s pushback on Russia-related provisions is notable given his attempts to forge closer relations with Russian President Vladimir Putin [..]

Tonga Prime Minister Akalisi Pohiva has called for China to write-off debts owed by Pacific island countries, warning that repayments impose a huge burden on the impoverished nations. Chinese aid in the Pacific has ballooned in recent years with much of the funds coming in the form of loans from Beijing’s state-run Exim Bank. Tonga has run-up enormous debts to China, estimated at more than US$100 million by Australia’s Lowy Institute think tank, and Pohiva said his country would struggle to repay them. He said the situation was common in the Oceania region and needed to be addressed at next month’s Pacific Island Forum summit in Nauru. “We need to discuss the issue,” he told the Samoa Observer in an interview published on Tuesday.

“All the Pacific Island countries should sign this submission asking the Chinese government to forgive their debts. “To me, that is the only way we can all move forward, if we just can’t pay off our debts.” Tonga took out the Chinese loans to rebuild in the wake of deadly 2006 riots that razed the centre of the capital Nuku’alofa. Beijing has previously refused to write-off the loans by turning them into aid grants but did give Tonga an amnesty on repayments. Pohiva said China now wanted the debts repaid. “By September 2018, we anticipate to pay $14 million, which cuts away a huge part of our budget,” he said. Tonga’s ability to pay has been further dented this year by another massive rebuilding effort in Nuku’alofa, this time after a category five cyclone slammed into the capital in February.

“If we fail to pay, the Chinese may come and take our assets, which are our buildings.” “That is why the only option is to sign a submission asking the Chinese government to forgive our debts.” His comments come as Australia and New Zealand ramp up aid efforts in the Pacific to counter China’s growing presence in the region. Australia has raised fears in recent months Pacific nations’ debts to China leaves them susceptible to Beijing’s influence.

[..] embedded within the paper is a finding that’s just as stunning: that none of this is inevitable, and one of the main barriers between us and a stable planet — one that isn’t actively hostile to human civilization over the long term — is our economic system. Asked what could be done to prevent a hothouse earth scenario, co-author Will Steffen told The Intercept that the “obvious thing we have to do is to get greenhouse gas emissions down as fast as we can. That means that has to be the primary target of policy and economics. You have got to get away from the so-called neoliberal economics.” Instead, he suggests something “more like wartime footing” to roll out renewable energy and dramatically reimagine sectors like transportation and agriculture “at very fast rates.”

That “wartime footing” Steffen describes is a novel concept in 2018, but hasn’t been throughout American history when the nation has faced other existential threats. In the lead-up to World War II, the government played a heavy hand in industry, essentially shifting the U.S. to a centrally planned economy, rather than leaving things like prices and procurement of key resources up to market forces. By the end of World War II, about a quarter of all manufacturing in the United States had been nationalized. And while governments around the world continue to intervene heavily in the private sector — including in the U.S. — those interventions tend now to be on behalf of corporations, be it through subsidies to fossil fuel companies or zoning laws that favor luxury real estate developers.

The light begins to dawn when you look at the nutrition figures in more detail. Yes, we ate more in 1976, but differently. Today, we buy half as much fresh milk per person, but five times more yoghurt, three times more ice cream and – wait for it – 39 times as many dairy desserts. We buy half as many eggs as in 1976, but a third more breakfast cereals and twice the cereal snacks; half the total potatoes, but three times the crisps. While our direct purchases of sugar have sharply declined, the sugar we consume in drinks and confectionery is likely to have rocketed (there are purchase numbers only from 1992, at which point they were rising rapidly. Perhaps, as we consumed just 9kcal a day in the form of drinks in 1976, no one thought the numbers were worth collecting.) In other words, the opportunities to load our food with sugar have boomed.

As some experts have long proposed, this seems to be the issue. The shift has not happened by accident. As Jacques Peretti argued in his film The Men Who Made Us Fat, food companies have invested heavily in designing products that use sugar to bypass our natural appetite control mechanisms, and in packaging and promoting these products to break down what remains of our defences, including through the use of subliminal scents. They employ an army of food scientists and psychologists to trick us into eating more than we need, while their advertisers use the latest findings in neuroscience to overcome our resistance.

They hire biddable scientists and thinktanks to confuse us about the causes of obesity. Above all, just as the tobacco companies did with smoking, they promote the idea that weight is a question of “personal responsibility”. After spending billions on overriding our willpower, they blame us for failing to exercise it.

The real problem is that single-use plastic—the very idea of producing plastic items like grocery bags, which we use for an average of 12 minutes but can persist in the environment for half a millennium—is an incredibly reckless abuse of technology. Encouraging individuals to recycle more will never solve the problem of a massive production of single-use plastic that should have been avoided in the first place. Beginning in the 1950s, big beverage companies like Coca-Cola and Anheuser-Busch, along with Phillip Morris and others, formed a non-profit called Keep America Beautiful. Its mission is/was to educate and encourage environmental stewardship in the public. Joining forces with the Ad Council (the public service announcement geniuses behind Smokey the Bear and McGruff the Crime Dog), one of their first and most lasting impacts was bringing “litterbug” into the American lexicon through their marketing campaigns against thoughtless individuals.

Two decades later, their “Crying Indian” PSA, would become hugely influential for the U.S. environmental movement. In the ad, a Native American man canoes up to a highway, where a motorist tosses a bag of trash. The camera pans up to show a tear rolling down the man’s cheek. By tapping into a shared national guilt for the history of mistreatment of Native Americans and the sins of a throwaway society, the PSA became a powerful symbol to motivate behavioral change. More recently, the Ad Council and Keep America Beautiful teams produced the “I Want to Be Recycled” campaign, which urges consumers to imagine the reincarnation of shampoo bottles and boxes, following the collection and processing of materials to the remolding of the next generation of products.

At face value, these efforts seem benevolent, but they obscure the real problem, which is the role that corporate polluters play in the plastic problem. This clever misdirection has led journalist and author Heather Rogers to describe Keep America Beautiful as the first corporate greenwashing front, as it has helped shift the public focus to consumer recycling behavior and actively thwarted legislation that would increase extended producer responsibility for waste management.

Monsanto’s glyphosate-based weedkiller will be used in Europe for years to come, legal experts and campaigners say, despite a U.S. court ruling the company should pay $289 million in damages for causing cancer. The EU last year renewed use of the controversial weedkiller for another five years after a yearslong political debate over its safety and impact on the environment. That means Europe will have to wait until the end of 2022 at the earliest before making any attempt to ban the substance outright. Campaigners also say the mounting legal pressure Monsanto faces in the U.S. from thousands of other plaintiffs filing suits against the company is unlikely to be replicated in Europe, namely because Europe doesn’t have the same legal mechanism of a class action lawsuit as the U.S.

“I’m not very confident that the decision in the U.S. will expedite a ban in Europe as it’s a complicated legal process that takes time,” said Arnaud Apoteker, managing director of the NGO Justice Pesticides. “Countries could go back to the Commission to say that the proposal [to renew glyphosate] could be re-tabled, but this is a very lengthy process.” Apoteker has compiled all lawsuits involving pesticides into a single database and has so far only discovered two made against Monsanto in the EU. One dates back to 2007 and was filed by a farmer named Paul François, who alleged Monsanto’s Lasso herbicide caused his chronic illness and that the product was inadequately labeled. The other was filed at a court in Lyon last year by Sabine Grataloup, who accuses Monsanto’s Roundup weedkiller of causing severe malformations in her 11-year-old son Théo.

A woman has activated the ancient Norman rite of Clameur de Haro to protest against the narrowing of a road which she claims would endanger pedestrians and motorists. Rosie Henderson, from Guernsey, raised the clameur by kneeling and calling for help and reciting the Lord’s Prayer in Norman French. Fully enforceable in Guernsey and Jersey law, it means the construction work in St Peter Port must stop until a court decides the case. Henderson, a parish councillor, raised the clameur on Tuesday by the roads of Les Échelons and South Esplanade, near the construction site. The clameur states: “Haro! Haro! Haro! A l’aide, mon prince, on me fait tort”, translated as “Come to my aid, my prince, for someone does me wrong”.

Whoever calls the clameur has 24 hours to register it in court, but whoever it is called against must stop all work immediately. Legend says the raising of a clameur stretches back to the early Norman period in the Channel Islands and is thought to have been a plea to Rollo, the first Duke of Normandy. The feudal law dates back to the 10th century as a form of self-policing when there was no law enforcement. In 2016, plans to overhaul St Peter Port’s sunken gardens, by levelling the site with the street and moving the war memorial, were withdrawn after protesters pledged to use the Clameur de Haro to block the proposals.

Needless to say, we have reached the mane. What drove the US economy for the past three decades was debt expansion – private and public – at rates far faster than GDP growth. But that entailed a steady ratcheting up of the national leverage ratio until we hit what amounts to the top of the tiger’s back – that is, Peak Debt at 3.5X national income. As we also showed yesterday, the fulcrum event was Nixon’s abandonment of the dollar’s anchor to a fixed weight of gold at Camp David in August 1971. That unleashed the Fed to expand it balance sheet at will, thereby injecting fiat credit into the financial system at relentlessly accelerating rates; and it also paved the way for takeover of the FOMC by Keynesian academics and apparatchiks in lieu of the conservative bankers and money men who had run the Fed prior to 1970.

At length, the Fed’s balance sheet grew by 82X over the 48 years since June 1970, erupting from $55 billion to $4.5 trillion at the recent QE3 peak. The effect was drastic and enduring financial repression that drove bond yields far below what would have prevailed on the free market based on the supply of domestic real money savings. Stated differently, as the so-called “reserve currency issuer” the Fed’s massive balance sheet eruption forced money-printing reciprocity among all the central banks of the world owing to the fear of rising exchange rates – a syndrome which afflicts politicians and policy-makers everywhere. So the convoy of modest central bank balance sheets that collectively stood at perhaps $80 billion in June 1970 totals more than $22 trillion today.

That is, herded-on by the rogue central bank unleashed at Camp David, the convoy of global central banks evolved into a gigantic yield-insensitive bond buyer. For all practical purposes, they collectively operated the monetary equivalent of roach motels: The bonds went in but never came out. This massive sequestering of real debt funded by fiat credits, which central banks conjured from thin air, had the obvious first order effect of suppressing yields well below honest market clearing levels. That’s just the law of supply and demand 101.

[..] global GDP has expanded from about $3 trillion to $80 trillion since 1970 or by 26X. By contrast, the balance sheets of central banks has exploded by around 275X. [..] In June 1970 the GDP was $1.1 trillion and it has since expanded by 18X to $19.6 trillion. By contrast, total public and private debt outstanding was $1.58 trillion and has since expanded by 42X to $67 trillion. In effect, the law of compounding eventually rules. That’s because to extend these unsustainably divergent trends for even another decade would lead to an outright absurdity. As we also pointed out in Part 1, ten years from now nominal GDP would total $35 trillion and total public and private debt would reach $150 trillion.

When it comes to stock buybacks – an increasingly politically charged topic – 2018 has already been a historic year: as we reported last weekend the $171 billion in YTD stock buyback announcements is the most ever for this early in the year. In fact, it is already more than double the prior 10 year average of $77 billion in YTD buyback announcements. And, according to Goldman’s revised forecast of corporate cash use, the buyback tsunami is about to be truly unleashed this year. In a note released on Friday, Goldman’s chief equity strategist David Kostin revises his prior forecast for S&P 500 corporate cash spending, and now expects that in 2018 corporate cash outlays will grow by 15% to $2.5 trillion as a result of corporate tax reform and strong EPS growth, with $1.4 trillion (54% of the total) going toward growth while $1.2 trillion (46%) gets returned to shareholders.

While Goldman expects capex to grow by a modest 11% to $690BN, remaining the single largest use of cash, it will be so only by a fraction as buybacks will be breathing down CapEx’ neck, and are set to increase by a whopping 23% from $527BN in 2017 to an all time high of $650BN, an amount which would make total 2018 buybacks the highest annual S&P500 stock repurchase on record. A quick reminder: corporations – via share buybacks – have been the main buyers of shares in the U.S. since 2009. Non-financial corporates have repurchased a net US$3.3 trillion worth of US equities since 2009, according to the Federal Reserve’s flow of funds data based on calculations from CLSA’s Chris Wood. By contrast, households and institutions (insurers and pension funds) have sold a net US$672 billion and US$1.2 trillion respectively over the same period, while mutual funds and ETFs have bought a net US$1.6 trillion.

[..] Chris Cole last October perfectly encapsulated the importance of stock buybacks to perpetuate the record low vol regime observed until recently: “The later stages of the 2009–2017 bull market are a valuation illusion built on share buyback alchemy…The technique optically reduces the price-to-earnings multiple because the denominator doesn’t adjust for the reduced share count… Share buybacks are a major contributor to the low volatility regime because a large price insensitive buyer is always ready to purchase the market on weakness…Share buybacks result in a lower volatility, lower liquidity, which in turn incentivizes more share buybacks, further incentivizing passive and systematic strategies that are short volatility in all their forms. Like a snake eating its own tail, the market cannot rely on share buybacks indefinitely to nourish the illusion of growth. Rising corporate debt levels and higher interest rates are a catalyst for slowing down the $500-$800 billion in annual share buybacks artificially supporting markets and suppressing volatility.” A graphic representation of Cole’s lament:

Billionaire Ray Dalio has $18.45 billion in bets against Europe’s biggest stocks. Most of the rest of the investing world is headed in the other direction. U.S. stocks lost $9.7 billion in investment so far this month while Eurozone shares have gained $3.2 billion, according to data compiled by Bloomberg. Peers of Dalio’s firm, Bridgewater Associates, are mostly wagering that Eurozone equities will rise. “I’m surprised. That’s a big bet. Dalio and his team are very confident,” said Rick Herman at BB&T Institutional Investment. “That’s definitely out of consensus. European stocks are cheaper, and they also have stronger earnings growth.”

Dalio has always marched to the beat of his own drummer, so his big short position, especially when other hedge funds are betting in the opposite direction, could be seen in that context. Even among those who are short, Bridgewater stands out, according to a Bloomberg survey of hedge funds. The combined value of their shorts stands at $23 billion. Dalio’s position has decreased from $22 billion on Feb. 15 but is still a whopping 43% larger than the outstanding bets by Cliff Asness’s AQR Capital Management.

In recent weeks, the euro has been at its highest level, relative to the US dollar, that we’ve seen in the last three years. This is a movement that surprises when the European Central Bank is carrying out the most aggressive monetary expansion in the world after the Bank of Japan. A strong euro is not a problem for any European citizen. European households keep a large part of their financial wealth in deposits. Additionally, a strong euro curbs inflation in imported products, mainly energy and food, generating a significant wealth effect. If we look at the commodity index between January 6, 2017 and January 12, 2018, we can see that it has fallen by more than 12% in euros, while it is slightly up in US dollars. For the average European citizen, a stable or strong euro is a blessing, and one of the essential factors for the recovery of household disposable income.

A strong euro has not been a problem either for exports. Spain, for example, has increased by 53% the weight of exports in GDP in the last five years and Eurozone exports in 2017 marked a record, growing more than the average of global trade and with a record trade surplus, which is one of the decisive factors explaining the euro strength. But a strong euro is bad news for central planners, indebted states and obsolete or low value-added sectors that need the hidden subsidy of devaluation. A strong euro destroys the ECB expectations of inflation, the increase in estimated profits of the low productivity sectors and puts in danger the debt reduction of inefficient states, which have been unable to reduce their deficits quickly enough. The ECB´s monetary policy, which becomes an assault on the savers and efficient sectors to subsidize the inefficient and indebted, does not work in a globalized world with open economies.

And, ironically, that is good for European families, who see their wealth in deposits strengthen and stable disposable income because inflation is low. Although the ECB maintains ultra-low rates and monthly repurchases of 30,000 million euros, they are unable to devalue as they would like. The European central planner must scratch its head thinking why. The US economy accelerates its growth, inflation expectations rise, the trade deficit is at decade-lows, the Federal Reserve is raising interest rates … And the US dollar does not strengthen. The main explanation lies in the trade surplus of China and the Eurozone. Central banks should know it is difficult to have rising trade profits and weakening currencies. A weak dollar while the US economy grows as it is, means an opportunity for the Federal Reserve. It can raise rates and strengthen options ahead of a global slowdown without worrying about its currency. Will Powell use this opportunity?

A 1% rise in interest rates would add around £10bn to the UK’s mortgage bill, according to analysis from estate agent Savills. The increase would equate to adding £930 a year to the cost of servicing the average mortgage. Borrowers on variable rate deals influenced by movements in the Bank of England base rate would be the first to feel the pain, putting the annual mortgage bill up by £4.3bn immediately, Savills said. The 59% of borrowers on fixed-rate deals would feel the impact later, when their existing mortgage deals come to an end. Of the total increase, Savills calculates that buy-to-let landlords would pay an additional £2.4bn, with other home owners paying £7.8bn more.

“This would bring an end to the historically low mortgage costs that have boosted housing affordability and limit the buying power of those needing a mortgage, and underscores our forecasts for more subdued house price growth over the next five years,” said Lucian Cook, head of residential research at Savills. Savills forecasts that average UK house price growth will stand at 14% in total over the next five years. Borrowers are bracing themselves for further possible interest hikes following the increase last year from 0.25% to 0.5%. Earlier this month, the Bank of England governor, Mark Carney, readied borrowers for further and faster interest rate hikes, although he also stressed that rises would be limited and gradual.

Jeremy Corbyn will today create a clear Brexit dividing line between Labour and the Tories in a keynote speech which will see him finally commit to keep the UK in a European customs union. The Labour leader will argue the move would enable his party to secure “full tariff-free access” to the single market but without committing to all of its rules, allowing him to negotiate exemptions on freedom of movement and workers’ rights. The move ends months of speculation about Mr Corbyn’s stance on the issue, which goes to the heart of the debate about Britain’s future. It also simultaneously heaps pressure on Theresa May as pro-EU Tory rebels are poised to join Labour and force her to keep the UK in the customs union.

The Prime Minister is scrambling to agree Britain’s approach to the future relationship with the EU by Friday, as Brexiteers also threaten her leadership from the right, if she fails to seek a deal that allows the UK to agree trade deals – something staying in the customs union would preclude. In a much-anticipated speech in Coventry, Mr Corbyn will say: “Britain will need a bespoke relationship of its own. Labour would negotiate a new and strong relationship with the single market that includes full tariff-free access and a floor under existing rights, standards and protections. “That new relationship would need to ensure we can deliver our ambitious economic programme, take the essential steps to upgrade and transform our economy, and build an economy for the 21st century that works for the many, not the few.”

Turkish President Recep Tayyip Erdogan has lashed at what he claims is a “worldwide war of propaganda” against his country. “The launching of a worldwide war of propaganda based on lies, slander and distortion, by those who cannot deal with Turkey on the ground will not work,” Erdogan was quoted by Anadolu agency as saying during a meeting of his ruling Justice and Development Party (AKP) in southern Turkey on Saturday. “Those who see us as yesterday’s Turkey and treat us in this manner have begun to gradually realize the truth,” Erdogan said, according to the report.

As usual, the West has demonstrated its ability to fire off a quick response when it comes to slamming Russia for something it has not done. This time it’s about Eastern Ghouta, a Damascus suburb under terrorist control. The accusation? Russia and its ally Syria are guilty of killing innocent civilians, thanks to their “devastating” attacks and “siege-and-starve tactics.” It’s the same old story – no actions against terrorists are permissible because of the risk of collateral damage. The Western media have jumped on the anti-Russia bandwagon as readily as if they were orchestra members carefully following the tempo of their conductor’s baton. US Ambassador to the UN Nikki Haley wasted no time chiming in. One has to do some digging into the problem to see what’s really happening in Eastern Ghouta.

It was reported on Feb. 21 that talks to end the hostilities had broken down because the terrorists had refused to lay down their arms. The anti-government groups, including the notorious Al-Nusra (Hayat Tahrir al-Sham), have prevented civilians from leaving this dangerous zone. They are obstructing the humanitarian operations of international aid agencies, such as the Red Cross and World Food Program. The UN has repeatedly expressed its concern over the situation in the region, urging that humanitarian access to the area be safeguarded.

The presence of armed jihadists in Eastern Ghouta, which is at the root of the problem, is never mentioned in Western press reports. The attacks on Russia’s embassy in Damascus, carried out by the same “guys” who are causing the suffering of civilians in Ghouta, receive little or no media attention. Russian aircraft did not conduct air strikes on this suburb. The Western accusations are groundlessand offer no details. The Russian military has been involved in humanitarian efforts to help the refugees fleeing this dangerous area. It was Moscow alone who called for the urgent UN Security Council meeting to discuss the situation.

The Syrian authorities have never made a secret of their intention to rid the area of jihadists. A ground offensive might be coming soon, but would that be a bad thing? Isn’t it the duty of any government to provide security to its citizens by fighting the terrorists who are holding civilians hostage? Terrorists from Eastern Ghouta regularly shell Damascus, killing civilians. The sooner the suburb is liberated, the better for everyone. If the anti-Assad fighters were real patriots, they would have left the populated areas a long time ago. Instead, they use civilians as human shields. Aren’t they the ones to blame for this dire situation? But no, the Western media call them “rebels,” not “gangs of ruthless murderers.” The terrorists in Ghouta won’t surrender because they are pinning their hopes on the West to help them out.

On the fifth of April, 2017, CNN staged a fake, scripted interview featuring a seven year-old Syrian girl sounding out pro-regime change talking points syllable-by-syllable using concepts that she could not possibly understand. CNN host Alisyn Camerota was asking the child questions throughout the performance, which means that Camerota necessarily had the other half of the script. CNN has never offered an explanation for this event, and nobody has ever been able to provide me with a plausible defense of it. This is not some tinfoil hat fantasy I made up in my imagination. This happened. CNN knowingly staged a fake, scripted interview and deceitfully passed it off to its audience as a real one, exploiting a small child for interventionist propaganda in an inexcusably fraudulent way.

And yet CNN has the gall to get huffy and indignant when it’s suggested that they tried to use scripted questions in a town hall about the Florida school shooting. I rarely pay much attention to the false flag theories which emerge after every hotly publicized mass shooting in America. They’re very convoluted and consist mostly of pointing out inconsistencies and plot holes in the official story being advanced, without offering any clear substantial narrative about what did happen and why. It’s not that I doubt for one second that the US power establishment would butcher American citizens if it significantly benefitted them, I just see no clearly laid-out evidence that that’s what happened in these cases. That said, the fact that the same mass media machine which brazenly staged a war psyop using a seven year-old girl is loudly condemning people who question the official narrative about the Florida school shooting is obscene.

[..] The mass media created conspiracy theories. By lying to the public day after day after day in the most grotesque and brazen ways imaginable, they created an environment where people will necessarily question the ways in which reality differs from what they’ve been told. How could they not? And yet these depraved manipulators still dedicate massive amounts of resources toward putting immense public pressure on anyone who still has unanswered questions, because Seth Rich’s family wants you to shut up and some guy shot a hole in a pizza shop floor.

Most people find managing their own affairs sufficiently challenging. Earning a living, establishing a family, rearing children, saving for college and retirement, and dealing with illness and aging fill the days and leave little time, attention, or energy to manage someone else’s affairs. A hypothesis: the effort required to run other people’s lives is an exponential function. If X is the sum total of everything required to run your life; running two lives is X squared; three lives is X cubed, and so on. Call it the exponent problem. For partial verification, try running someone else’s life for a day or two. See how it works out for you and the other person. Why do governments fail? Government is someone imposing rules on someone else, and backing them up with repression, fraud, and violence when necessary.

The governed always outnumber those governing, which means the latter face the exponent problem. In the US, there are around 22 million employed by the government, and let’s add in another million who actively influence it. The US population is around 323 million, so there are 23 million rulers to 300 million ruled, or about 13 ruled per ruler. How fitting, like the 13 original colonies! Whatever amount X of time, energy, money, attention, and other resources the rulers expend on their own lives, they must expend that X to the thirteenth power to “govern” the ruled. If X could actually be quantified and it was only 2, it would still take 8192 times the effort to rule the US as it does for the rulers to govern their own lives. Those are just illustrative numbers, but you get the picture. No wonder rulers use repression, fraud, and violence.

They’re overwhelmed by the exponent problem. On its best days governance is a comic proposition, on its worst, a tragic and terrible one. A farce, but in its own way tragic and terrible, is preceding the ultimately tragic and terrible outcome of the US government’s efforts to govern every aspect of its constituents’ lives and exercise power over what it considers its global domain.

Commercial fishing covers more than 55% of the ocean’s surface, a new study has revealed in a potentially worrying sign about the depletion of marine resources. Fish from the wild do not currently contribute a significant portion of human caloric consumption, but “the footprint of industrial fishing in the ocean is over four times larger than the land area occupied by agriculture,” researchers said in a paper published by the journal Science on Thursday. And the bulk of activity is dominated by just five countries: China, Spain, Taiwan, Japan and South Korea. Publishing a comprehensive map of global fisheries for the first time using satellite technology and big data, researchers discovered that fishing patterns were strongly influenced by cultural and political events rather than weather.

“The Christmas holiday and fishing moratorium in China have a bigger effect on the global temporal footprint of fishing than any seasonal weather changes.” Every year, the world’s second-largest economy imposes a nation-wide fishing ban that usually lasts for three months. Beijing will institute the rule in the Yellow River from April 1 to June 30 this year, Xinhua reported this week. Other water bodies, such as the Yangtze River and Pearl River, could also see annual bans.

Middle-aged millennials are set to be the most overweight generation since records began, with experts warning they are unwittingly and significantly increasing their risk of cancer. Analysis by Cancer Research UK (CRUK) shows that on current trends 70% of millennials, those born between the early 1980s to mid-1990s, will be overweight or obese by the age 35 to 45. However, despite being linked to 800,000 cancer cases a year, the vast majority of people are unaware of the additional risk obesity brings. Health campaigners said the figures were “horrifying” and a consequence of the Government only paying “lip service” to tackle the obesity crisis, while slashing health budgets.

The seven out of 10 figure for millennials compared to around 50% of the “baby boomer” generation, born between 1945 and 1955, who were overweight or obese in their thirties and forties. “This means millennials are the most overweight generation since current records began”, said CRUK after it extrapolated current obesity trends to look at the state of the nation’s weight in 2028. The UK is already the most overweight nation in Western Europe, with obesity rates rising even faster than in the US. However, just 15% of people in the UK are aware that being obese increases your risks of developing bowel, kidney and breast cancers, and at least 10 other types.

In early March 2009, the current bull market began in the same way that most of the great bull runs in history have, at a moment when investors were terrified to own stocks. Since then it has been nothing but good times. We are now eight and a half years into this bull market making it the second longest in history. This party has been fun. And for a handful of the most popular stocks, fun doesn’t do it justice. The party has been positively off the chains. The stocks that I’m talking about are the FANG (Facebook, Amazon, Netflix and Google) stocks plus a few of their friends (Tesla, Alibaba and others). These stocks have vastly outperformed the market during this bull-run. Now this is where I become a bit of a party-pooper.

Where Joseph Kennedy Sr. had his shoeshine boy moment for the market in 1929, I believe that a similar warning sign arrived for FANG and friends this summer. Remember, they don’t ring a bell at the top but there are signs. This I believe is a big one… The demand for these stocks has become so high that specific ETFs and dedicated index funds are being launched that are comprised only of FANG and friends. Not just an ETF or index fund, but multiple versions. That latest is called the NYSE FANG+ index. It includes 10 highly liquid stocks that are considered innovators across tech and internet/media companies. It is marketed as a benchmark of today’s tech giants. That may be true, but it is also a benchmark of some of the most expensive stocks in the entire S&P 500. Here are its components:

Yes, I’d love to go back in history and own this group of stocks three years ago. But would I want to own them after an already incredible run? No! As a group these stocks are frighteningly expensive today. That is generally what happens when stocks go up that fast, they become much less attractively valued.

If you don’t believe me, here is the evidence. The stock market has returned more than 60% since 2007 peak, which is more than three times the growth in corporate sales growth and 30% more than GDP. The all-time highs in the stock market have been driven by the $4.5 trillion increase in the Fed’s balance sheet, hundreds of billions in stock buybacks, PE expansion, and ZIRP.

It is critical to remember the stock market is NOT the economy. The stock market should be reflective of underlying economic growth which drives actual revenue growth. Furthermore, GDP growth and stock returns are not highly correlated. In fact, some analysis suggests that they are negatively correlated and perhaps fairly strongly so (-0.40). However, in the meantime, the promise of a continued bull market is very enticing as the “fear of missing out” overrides the “fear of loss.” This brings us back to Jack Bogle and the importance of valuations which are often dismissed in the short-term because there is not an immediate impact on price returns. Valuations, by their very nature, are HORRIBLE predictors of 12-month returns should not be used in any strategy that has such a focus. However, in the longer term, valuations are strong predictors of expected returns.

[..] I have also previously modified Shiller’s CAPE to make it more sensitive to current market dynamics. “The need to smooth earnings volatility is necessary to get a better understanding of what the underlying trend of valuations actually is. For investor’s, periods of ‘valuation expansion’ are where the bulk of the gains in the financial markets have been made over the last 116 years. History shows, that during periods of ‘valuation compression’ returns are more muted and volatile. Therefore, in order to compensate for the potential ‘duration mismatch’ of a faster moving market environment, I recalculated the CAPE ratio using a 5-year average as shown in the chart below.”

To get a better understanding of where valuations are currently relative to past history, we can look at the deviation between current valuation levels and the long-term average going back to 1900.

The Federal Reserve keeps talking about a “return to normal” in monetary policy. The media must buy into it, because it keeps repeating the phrase. Many investors buy into it, too. After all, it is the high and mighty Fed speaking. This “normal” is defined by interest rates, but interest rates are defined by the economics that surround them. Interest rates do not exist in a vacuum. But since we are in an economic environment never before seen in history, where data compiled by Bloomberg show that central banks have amassed $21.5 trillion in assets, how can there possibly be any notion of “normal?” Nothing in history supports the claim. Without a history, “normal” is a meaningless term. Think about it: In response to the financial crisis, central banks have essentially manufactured in just nine years an economy that is bigger than the gross domestic products of either the U.S. or China.

I am more than willing to recognize the accomplishment, but to call it “normal” is either a ruse or the height of foolishness. There is nothing “normal” about it. Some may say it is the “crown of creation,” and a case can be made for this argument, but it is not a crown that was ever seen before. This is why, when assessing financial markets, I keep pointing at the money. It is the giant amount of manufactured capital that is holding interest rates down, pushing equities up and compressing all risk assets against their sovereign benchmarks. It isn’t inflation or housing data or wages or any other piece of data that can be singled out. Those are, by comparison, flyspecks in the wind. Simply put, all that money has created demand that outstrips the current supply in bonds, in equities, in stock price-to-earnings multiples, in historical risk valuations and in credit assets.

Therefore, the economic environment that underlies asset pricing is, in fact, distorted. The Fed’s claim of some sort of “normalcy” is a charade. Fed Chair Janet Yellen can say it, and so can Fed governors and presidents, but there is not one grain of truth in the telling. It is nothing more than mumbo-jumbo because they do not wish you to recognize what is actually happening. They have taken over markets and now totally control and dominate them, regardless of the usual day-to-day antics.

ECB officials are considering cutting their monthly bond buying by at least half starting in January and keeping their program active for at least nine months, according to officials familiar with the debate. Reducing quantitative easing to €30 billion ($36 billion) a month from the current pace of €60 billion is a feasible option, said the officials, who asked not to be identified because the deliberations are private. While the central bank’s governors are split on the need to identify an end date for purchases, a pledge to keep buying bonds until September – with the proviso that it could be extended if needed – may offer grounds for compromise, they said. Policy makers led by President Mario Draghi are becoming increasingly confident that ECB policy makers will on Oct. 26 agree to the specifics of how much debt the euro-area’s central banks will buy in the coming year.

After more than 2 1/2 years of trying to revive the region’s economy through bond purchases, some governors see the recent period of robust growth as a reason to rein in the support. Others are concerned that inflation remains too weak. Any changes to the sum and time frame of quantitative easing would still fit into the ECB’s present guidance on monetary policy, which commits the ECB to promise “a sustained adjustment in the path of inflation consistent with its inflation aim.” It also pledges that if “the outlook becomes less favorable, or if financial conditions become inconsistent with further progress toward a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the program in terms of size and/or duration.”

Boeing, the world’s biggest maker of passenger jets, has used Kobe Steel products that include those falsely certified by the Japanese company, a source with knowledge of the matter told Reuters. Boeing does not as yet consider the issue a safety problem, the source stressed, but the revelation may raise compensation costs for the Japanese company, which is embroiled in a widening scandal over the false certification of the strength and durability of components supplied to hundreds of companies. The U.S. airline maker is carrying out a survey of aircraft to ascertain the extent and type of Kobe Steel components in its planes and will share the results with airline customers, said the source who has knowledge of the investigation.

Even if the falsely certified parts do not affect safety, given the intense public scrutiny that airlines operate under they may opt to replace suspect parts rather than face any backlash over concerns about safety. Any large-scale program to remove those components, even during scheduled aircraft maintenance, could prove costly for Kobe Steel if it has to foot the bill. Kobe Steel’s CEO, Hiroya Kawasaki, on Thursday said his company’s credibility was at “zero.” The company, he said, is examining possible data falsification going back 10 years, but does not expect to see recalls of cars or airplanes for now.. Also in the U.S., General Motors said it is checking whether its cars contain falsely certified components from Kobe Steel, joining Toyota and around 200 other firms that have received falsely certified parts from the company.

Boeing does not buy products such as aluminum composites, used in aircraft because of their light weight, directly from Kobe Steel. Its key Japanese suppliers, including Mitsubishi Heavy Industries, Kawasaki Heavy Industries and Subaru, however, do. These Japanese companies are key parts of Boeing’s global supply chain, building one fifth of its 777 jetliner and 35% of its carbon composite 787 Dreamliner.

Kobe Steel’s fake data scandal expanded to its core business after the company admitted “inappropriate actions” related to steel wire produced overseas, triggering a fresh collapse in its shares and heightened speculation that the steelmaker may get broken up. Customers have been informed about the issue, which has been resolved, Tokyo-based spokeswoman Eimi Hamano said by phone, declining to provide details. Kobe Steel falsified quality certification data for steel wire used in auto engines and to strengthen tires, the Nikkei newspaper reported Friday. Kobe’s admission of misconduct in its steel business, which accounts for about a third of revenue, ratchets up the pressure on Japan’s third-biggest steelmaker.

The company’s disclosures had up until now dealt with aluminum, copper and iron ore products used in everything from cars to computer hard drives to Japan’s iconic bullet trains, although there haven’t been any reports of products being recalled or safety concerns raised. The deepening scandal “suggests that this is company culture, not just the actions of a few rogue employees,” Alexander Robert Medd, managing director at Bucephalus Research in Hong Kong, said by email. The question to be resolved is “were they trying to save money or just unable to produce the right spec in the right quantities,” he said. Kobe’s shares have plunged 42% this week, including a 9.1% drop on Friday, after it revealed on Sunday that it had fudged data on the strength and durability of metals supplied to as many as 200 customers around the world, including Toyota, General Motors and space rocket-maker Mitsubishi Heavy Industries.

[..] SMBC Nikko Securities said in a note the new revelations around steel wires could be “quite negative” for Kobe Steel’s creditworthiness as the company holds roughly half of the global market share for the wires used in valve springs of auto engines. If doubts arose over the safety of the wires, it could “shake the foundation” of the company, according to chief credit analyst Takayuki Atake.

Bryan Schild drives through the byways of Houston looking for what could be the investment opportunity of a lifetime: homes selling for as little as 40¢ on the dollar. “We Pay Cash For Flooded Homes $$$$$$$$ Don’t fix it, sell it. Quick close,” read the signs piled in the back seat of his Ford pickup. Schild stops by a ranch-style house where 74-year-old Paul Matlock lives with his wife, disabled from multiple sclerosis. Matlock is desperate to leave and is considering Schild’s offer of $120,000—half the home’s value three weeks earlier. A half-dozen other investors have made offers, one as low as $55,000. “The whole thing makes me feel like there’s a bunch of vultures sitting on my back fence,” Matlock says. “They’re waiting for the dead body to fall over.”

It’s axiomatic on Wall Street that the time to buy is when fear overtakes greed—when blood (or, in this case, water) is in the streets. Now some are eyeing the billions of dollars in hurricane-ravaged property in Texas and Florida and deciding it may be the time to take out their checkbooks. Investors such as Schild figure they can buy low, either fix up and flip the houses or rent them out for several years, and unload them later, doubling their money or more. Those kinds of bets have often paid off. Buyers who snapped up co-ops and office towers when New York was near bankruptcy in the 1970s made a killing. More recently, companies including Blackstone and other marquee names bought foreclosed homes after the 2008 financial crisis and are sitting on billions in potential gains.

The cycle begins with small-time investors such as Schild, who’s bought more than 30 waterlogged houses for an average $175,000 apiece. Then Wall Street swoops in. Gary Beasley, former CEO of Waypoint Homes, also sees an opportunity. He’s pitching private equity firms and pension funds on the potential profit in buying flooded homes, repairing them, and renting them back to homeowners. Bain Capital and billionaire Marc Benioff, co-founder of Salesforce.com, are backing Beasley’s two-year-old company, Roofstock. It runs a website where investors can buy and sell single-family rental properties. Beasley thinks owner-occupants may be interested in selling there, too, and that flooded neighborhoods are the Next Big Thing. “It’s much like the housing crisis, when the institutional guys came in to buy homes nobody wanted,” he says. Like other investors, Beasley and Schild view themselves as helping homeowners to move on and Houston to rebuild.

Lest there be any doubt, the electrified race for supremacy in self-driving cars is being played by Silicon Valley rules. How do we know this? By Tesla Chairman Elon Musk’s recognition that his long-awaited Model 3 compact is “in production hell,” that it’s complicated by “bottlenecks” and by confirmation that parts of the cars are being “hand-built.” This amazing accomplishment is being greeted, well, differently by investors than it would if, say, General Motors Chairman Mary Barra copped to the same kind of chaos with its electric Chevrolet Bolt … or just about any other eagerly anticipated model in its lineup. Tesla mostly gets a pass, as it does for losing money on every car it produces. The nearly 4% slide in its shares Monday, the first trading day after The Wall Street Journal reported the messy Model 3 launch, has since recouped most of the loss, judging by the market close Wednesday.

To free “resources to fix Model 3 bottlenecks” and increase battery production to help hurricane-ravaged Puerto Rico, Musk tweeted that Tesla’s anticipated demonstration of its self-driving truck would be delayed until Nov. 16. Detroit (and its foreign-owned rivals) would get crucified for a similar mess. Analysts, the news media and, especially, investors would show scant tolerance for misses of that magnitude from traditional auto industry players — and all of them would demand answers. Tesla? Not so much. Never mind that Musk, the automotive wunderkind, might risk missing what Barclays Research calls the “iPhone moment” for the Model 3, Tesla’s long-awaited entry into the volume-priced electric car segment. You know, the segment already occupied by GM’s Chevy Bolt, Nissan’s Leaf and a slew of coming electric entrants from global automakers.

As a rule, they don’t botch production launches with the same aplomb as Musk’s hand-built production hell. They also have broader distribution networks under existing state franchise laws; more disciplined production systems with longer lead times to ensure more consistent quality at launch; and greater transparency with investors, analysts and the news media. This will be fascinating to watch. Tesla’s Model 3 is one of the most highly anticipated car launches in a long time. It’s supposed to be sheet metal and electric powertrain proof that Silicon Valley innovation can beat Detroit and Stuttgart, Tokyo and Seoul at their own game.

The US electricity system is often described as the world’s largest machine. It is also incredibly diverse, reflecting the policy preferences, needs and available natural resources of each state. Carbon Brief has plotted the nation’s power stations in an interactive map to show how and where the US generates electricity. A few key messages can be gleaned from the map and associated data interactives below: • The US electricity system has been changing rapidly over the past decade. This reflects not only federal policy, but also technologies, geographies, markets and state mandates. •The average US coal plant is 40 years old and runs half the time. Some 15% are at least 50 years old, against an average retirement age of 52. • Planned new power plants are almost exclusively gas, wind or solar.

Supplying electricity to a nation’s homes, business and industry is an almost uniquely challenging enterprise. For now, electrical energy is either expensive or inconvenient to store, meaning supply and demand must be balanced in real time. It is also easier to generate power close to home than to transport it over long distances. The way electricity is generated fundamentally depends on the fuels and technologies available. The march of progress means this mix is changing – but natural resources and geographies are fixed. Moreover, US states have broad powers to influence the electricity systems within their borders. Putting the US electricity system on a map offers visual confirmation of how important these factors are. Why is solar so prevalent in North Carolina, for example? Or coal in West Virginia?

You can use Carbon Brief’s interactive map to view all the power plants in the US and their relative electricity generating capacities, which are proportional to the size of the bubbles. The dynamic chart in the sidebar summarises the makeup of the capacity mix. It’s important to note that the map and related charts, below, are based on electrical generating capacity. The electricity generated each year by each unit varies according to its load factor (average output of a power station, relative to its installed capacity). US wind has a load factor of around 35% while solar is around 27%. These are lower load factors than for nuclear at around 90%. Coal and gas can, in theory, have similarly high load factors, but in practice both are at around 50% in the US.

Despite years of austerity policies, Greek civil servants remain significantly better paid than private sector wages, with their average wages 38% higher than their counterparts in the private sector, according to the Hellenic Federation of Enterprises (SEV). The average net monthly wage in the public sector is €1,075 compared to €777 in the private sector, according to figures made public in SEV’s weekly bulletin which underlined that the gap between the two is widening rather than closing. In the first half of this year, the average wage in the public sector rose marginally – by 0.1% – compared to a drop of 1.3% for private sector salaries, according to SEV’s analysis, which concluded that private sector workers saw their wages shaved by about €10 a month over that period.

In a related development, a report conducted by the civil servants’ union ADEDY reported an increase in permanent staff in the Greek civil service over the past year. An additional 1,293 staff were hired between August 2016 and last August, bringing the total number to 566,022, according to the report. Another finding was that most Greek civil servants – 80% of the total – take home a net monthly salary of less than €1,300. Half earn up to €1,000 a month, 44% take home between €1,000 and €1,500 and 3.6% net between €1,500 and €2,100, according to the report. Last month, SEV painted a dire picture of the state of the Greek pension system, which it described as running on empty, while warning that the country’s beleaguered private sector has taken on a disproportionate share of the burden to support pensioners and the public sector.

The rate of obesity in the United States has reached a new high, at 39.6% of adults, according to US government data released Friday. Health experts are concerned about obesity because it is associated with a number of life-threatening health conditions, including heart disease, stroke, diabetes and certain kinds of cancer. The adult obesity rate in the United States has risen steadily since 1999, when 30.5% of adults were obese. “From 1999–2000 through 2015–2016, a significantly increasing trend in obesity was observed in both adults and youth,” said the report, based on a nationally representative sample of the population, and issued by the National Center for Health Statistics.

“The observed change in prevalence between 2013–2014 and 2015–2016, however, was not significant among both adults and youth.” Its previous report for 2013 to 2014 found that 37.7% of adults were obese. Researchers said the difference between the current and last report is not statistically significant because it falls within the margin of error of the estimate. Adult obesity is defined as having a body mass index (BMI) of 30 or higher. Among youths aged two to 19, 18.5% are obese, the report said. The rate of youth obesity was 13.9% in 1999.

England’s chief medical officer has repeated her warning of a “post-antibiotic apocalypse” as she urged world leaders to address the growing threat of antibiotic resistance. Prof Dame Sally Davies said that if antibiotics lose their effectiveness it would spell “the end of modern medicine”. Without the drugs used to fight infections, common medical interventions such as caesarean sections, cancer treatments and hip replacements would become incredibly risky and transplant medicine would be a thing of the past, she said. “We really are facing – if we don’t take action now – a dreadful post-antibiotic apocalypse. I don’t want to say to my children that I didn’t do my best to protect them and their children,” Davies said.

Health experts have previously said resistance to antimicrobial drugs could cause a bigger threat to mankind than cancer. In recent years, the UK has led a drive to raise global awareness of the threat posed to modern medicine by antimicrobial resistance (AMR). Each year about 700,000 people around the world die due to drug-resistant infections including tuberculosis, HIV and malaria. If no action is taken, it has been estimated that drug-resistant infections will kill 10 million people a year by 2050. The UK government and the Wellcome Trust, along with others, have organised a call to action meeting for health officials from around the world. At the meeting in Berlin, the government will announce a new project that will map the spread of death and disease caused by drug-resistant superbugs.

A colony of about 40,000 Adélie penguins in Antarctica has suffered a “catastrophic breeding event” – all but two chicks have died of starvation this year. It is the second time in just four years that such devastation – not previously seen in more than 50 years of observation – has been wrought on the population. The finding has prompted urgent calls for the establishment of a marine protected area in East Antarctica, at next week’s meeting of 24 nations and the European Union at the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR) in Hobart. In the colony of about 18,000 breeding penguin pairs on Petrels Island, French scientists discovered just two surviving chicks at the start of the year. Thousands of starved chicks and unhatched eggs were found across the island in the region called Adélie Land (“Terre Adélie”).

The colony had experienced a similar event in 2013, when no chicks survived. In a paper about that event, a group of researchers, led by Yan Ropert-Coudert from France’s National Centre for Scientific Research, said it had been caused by a record amount of summer sea ice and an “unprecedented rainy episode”. The unusual extent of sea ice meant the penguins had to travel an extra 100km to forage for food. And the rainy weather left the chicks, which have poor waterproofing, wet and unable to keep warm. This year’s event has also been attributed to an unusually large amount of sea ice. Overall, Antarctica has had a record low amount of summer sea ice, but the area around the colony has been an exception.

Ropert-Coudert said the region had been severely affected by the break-up of the Mertz glacier tongue in 2010, when a piece of ice almost the size of Luxembourg – about 80 km long and 40km wide – broke off. That event, which occurred about 250km from Petrels Island, had a big impact on ocean currents and ice formation in the region. “The Mertz glacier impact on the region sets the scene in 2010 and when unusual meteorological events, driven by large climatic variations, hit in some years this leads to massive failures,” Ropert-Coudert told the Guardian. “In other words, there may still be years when the breeding will be OK, or even good for this colony, but the scene is set for massive impacts to hit on a more or less regular basis.”

Look around you. From your drone home delivery to that oncoming driverless car, change seems to be accelerating. Warren Buffett, the great investor, promises that our children’s generation will be the “luckiest crop in history”. Everywhere the world is speeding up except, that is, in the productivity numbers. This year, for the first time in more than 30 years, US productivity growth will almost certainly turn negative following a decade of sharp slowdown. Yet our Fitbits seem to be telling us otherwise. Which should we trust — the economic statistics or our own lying eyes? A lot hinges on the answer. Productivity is the ultimate test of our ability to create wealth. In the short term you can boost growth by working longer hours, for example, or importing more people.

Or you could lift the retirement age. After a while these options lose steam. Unless we become smarter at how we work, growth will start to exhaust itself too. Other measures bear out the pessimists. At just over 2%, US trend growth is barely half the level it was a generation ago. As Paul Krugman put it: “Productivity isn’t everything, but in the long run it is almost everything.” It is possible we are simply mismeasuring things. Some economists believe the statistics fail to capture the utility of setting up a Facebook profile, for example, or downloading free information from Wikipedia. The gig economy has yet to be properly valued. Yet this argument cuts both ways. Productivity is calculated by dividing the value of what we produce by how many hours we work — data provided by employers.

But recent studies — and common sense — say our iPhones chain us to our employers even when we are at leisure. We may thus be exaggerating productivity growth by undercounting how much we work. The latter certainly fits with the experience of most of the US labour force. It is no coincidence that since 2004 a majority of Americans began to tell pollsters they expected their children to be worse off — the same year in which the internet-fuelled productivity leaps of the 1990s started to vanish. Most Americans have suffered from indifferent or declining wages in the past 15 years or so. A college graduate’s starting salary today is in real terms well below where it was in 2000. For the first time the next generation of US workers will be less educated than the previous, according to the OECD, which means worse is probably yet to come. Last week’s US productivity report bears that out.

The risk of a default chain reaction is looming over the $3.6 trillion market for wealth management products in China. WMPs, which traditionally funneled money from Chinese individuals into assets from corporate bonds to stocks and derivatives, are now increasingly investing in each other. Such holdings may have swelled to as much as 2.6 trillion yuan ($396 billion) last year, based on estimates from Autonomous Research this month. The trend has China watchers worried. For starters, it means that bad investments by one WMP could infect others, causing a loss of confidence in products that play an important role in bank funding. It also suggests WMPs are struggling to find enough good assets to meet their return targets.

In the event of widespread losses, cross-ownership will create more uncertainty over who’s vulnerable – a key source of panic in 2008 when soured U.S. mortgage securities triggered a global financial crisis. Those concerns have become more pressing this year after at least 10 Chinese companies defaulted on onshore bonds, the Shanghai Composite Index sank 20% and China’s economy showed few signs of recovery from the weakest expansion in a quarter century. “There’s abundant liquidity in the financial system, but a scarcity of high-yielding assets to invest in,” said Harrison Hu, the chief Greater China economist at RBS in Singapore. “All the risks are accumulating in an overcrowded financial system.”

Issuance of WMPs, which are sold by banks but often reside off their balance sheets, exploded over the past three years as lenders competed for funds and fees while savers sought returns above those offered on deposits. The products, which offer varying levels of explicit guarantees, are regarded by many as having the implicit backing of banks or local governments. The outstanding value of WMPs rose to 23.5 trillion yuan, or 35% of China’s gross domestic product, at the end of 2015 from 7.1 trillion yuan three years earlier, according to China Central Depository & Clearing Co. An average 3,500 WMPs were issued every week last year, with some mid-tier banks, such as China Merchants Bank and China Everbright Bank, especially dependent on the products for funding.

Interbank holdings of WMPs swelled to 3 trillion yuan as of December from 496 billion yuan a year earlier, according to figures released by the clearing agency last month. As much as 85% of those products may have been bought by other WMPs, according to Autonomous Research, which based its estimate on lenders’ public disclosures and data on interbank transactions. The firm speculates that in some cases the products are being “churned” to generate fees for banks. “We’re starting to see layers of liabilities built upon the same underlying assets, much like we did with subprime asset-backed securities, collateralized debt obligations, and CDOs-squared in the U.S.,” Charlene Chu, a partner at Autonomous who rose to prominence in her former role at Fitch Ratings by warning of the risks of bad debt in China, said in an interview on May 17.

“The unconsolidated structured entities managed by the Group consist primarily of collective investment vehicles (“WMP Vehicles”) formed to issue and distribute wealth management products (“WMPs”), which are not subject to any guarantee by the Group of the principal invested or interest to be paid.”

Credit is a risky business, but loans that dare not speak their name? They are possibly even more dangerous, as China is about to find out.As many as 15 publicly traded Chinese lenders, large and small, report roughly $500 billion of such debt between them, which they hold not as loans but as receivables from shadow banking products. While the traditional credit business of these banks is 16 times bigger, receivables have jumped sixfold in three years. Explosive growth of this type usually ends badly. It’s hard to see why it’ll be different for the People’s Republic. Before they can brace themselves – or embrace the risk, if they think the rewards are worth it – equity investors need to know where to look. Flitting from one explanatory note to another in dense annual reports isn’t everybody’s idea of a day well spent.

But the effort may be worth it. For instance, page 184 of Agricultural Bank’s 2015 annual report informs us that the bank has 557 billion yuan ($85 billion) worth of assets tied in “debt instruments classified as receivables.” On page 245, we further learn that most of this is old hat, and the only fast-growing portion is an 18.7 billion yuan chunk helpfully titled as “Others.” A footnote adds that the category primarily consists of “unconsolidated structured entities managed by the group.” Give up? Then you miss the big reveal that occurs 34 pages later: “The unconsolidated structured entities managed by the Group consist primarily of collective investment vehicles (“WMP Vehicles”) formed to issue and distribute wealth management products (“WMPs”), which are not subject to any guarantee by the Group of the principal invested or interest to be paid.” That’s broadly how Chinese lenders disclose their cryptic linkages with shadow banks.

The names keep changing, from “investment management products under trust scheme” and “investment management products managed by securities companies” to “trust beneficiary rights” and “wealth management products.” The latter have swelled to the equivalent of 35% of GDP, and account for 3 trillion yuan of interbank holdings. The common thread to these products is that they’re all exposed to corporate credit and designed to get around lenders’ minimum capital requirements and maximum loan-to-deposit norms, with scant loss provisioning in case things go wrong.There’s plenty that could. The reported nonperforming loan ratio of 1.75% is a joke. CLSA says bad loans have already snowballed to 15 to 19% of the loan book; Autonomous Research partner Charlene Chu estimates the figure will reach 22% by the end of this year. A 20% loss on a $500 billion portfolio of loans masquerading as receivables would wipe out 58% of annual profit of the 15 banks under our scanner.

How many of China’s loans could turn bad? The official data show a non-performing loan ratio of 1.75%, but that’s widely believed to reflect optimistic accounting. Bloomberg Intelligence Economics has estimated the %age of “at risk” loans – those where the borrower doesn’t have sufficient earnings to cover interest payments. The results show 14% of corporate borrowing at risk of default, up from a low of 5% in 2010. By sector, the basic resources, retail and industrial sectors are among the highest risk. In the basic resources sector, 46% of loans are with firms without enough income to cover interest payments.

Telecommunications, utilities, and travel and leisure sectors look more secure, reflecting stronger earnings and lower debt. The methodology is based on an approach used by the IMF. For a universe of 2,865 Chinese listed firms (excluding financial companies), we screened for firms with interest costs higher than their EBITDA. We then calculated total debt of those firms as a %age of total debt of all listed firms. We assume that the ratio of “at risk” loans for the corporate sector as a whole is the same as for listed companies.

“..over-investment produces slow growth and falling prices while ever-more-aggressive monetary policy distorts markets beyond recognition and encourages new over-investment in different sectors, which then proceed to follow oil and steel into the deflationary abyss.”

So what happens to all that Chinese steel that was on its way to the US and EU before slamming into those prohibitively high tariffs? One of three things: Either it’s sold elsewhere, probably at even steeper discounts, thus pricing US and EU steel exports out of those markets. Or it’s stockpiled in China for future use, thus lowering future demand for new steel production and, other things being equal, depressing tomorrow’s prices. Or many of China’s newly-built steel mills will close, and China will eat the losses related to this malinvestment. Each scenario results in lower prices and financial losses somewhere. Put another way, as far as steel is concerned, the world’s fiat currencies are rising in value, which is the common definition of deflation.

And since steel is just one of many basic industries burdened with massive overcapacity, it’s safe to assume that the process which began with oil and recently spread to steel will continue to metastasize throughout the developed and developing worlds. Next up: real estate. “Modern” monetary policy, designed to achieve exactly the opposite outcome (that is, rising prices for real things), will in response be ratcheted up to ever-more-extreme levels — which in this analytical framework is like trying to douse a fire with gasoline. The result is a world in which past over-investment produces slow growth and falling prices while ever-more-aggressive monetary policy distorts markets beyond recognition and encourages new over-investment in different sectors, which then proceed to follow oil and steel into the deflationary abyss. And so on, until the system collapses under the weight of its own absurdity.

A prolonged period of negative interest rates is failing to revive investment at Europe’s companies, with the vast majority of businesses in the region saying the stimulus measures have had no affect at all on their growth plans. Some 84% of the 9,440 companies surveyed by Swedish debt collector Intrum Justitia AB for its European Payment Report 2016 say low interest rates haven’t affected their willingness to invest. And perhaps more alarmingly, the number is up from 73% last year. “Creating economic growth requires stability and optimism,” Intrum Justitia Chief Executive Officer Mikael Ericson said in the report. “Evidently, the strategy of keeping interest rates record low for more than a year has not created the much sought-after stability.”

Signs of stalling investment mark a blow to central banks hoping to revive growth across Europe through negative rates and quantitative easing. Europe needs its businesses to invest more if it’s to create the jobs needed to spur growth. In the euro area, where interest rates have been negative since mid-2014, gross domestic product will slow to 1.6% this year, compared with 2.3% in the U.S., the European Commission estimates. “A calculation of an investment includes assumptions of the future,” Intrum said. “To get the calculation to go together those assumptions need to include a belief in stability and prosperity in that future. Perhaps the negative interest rates do not signal that stability at all – rather that we are still in an extraordinary situation?”

The survey also identified another threat to growth, namely late payments. Some 33% of survey participants said they regard not being paid on time as a threat to overall survival while 25% said they are likely to cut jobs if clients pay late or not at all. That problem is more pronounced among Europe’s 20 million small and medium-sized companies, with many reporting that bigger firms are forcing them to accept late payments. “It is a market failure that costs job opportunities for millions of Europeans that big corporations deliberately force SMEs to finance their cash flow,” Ericson said. “As much as two out of five SMEs say late payments prohibit growth of the company. That large corporations use their much smaller sub-suppliers to act as financier of their own cash-management processes is not only wrong, it also creates an imbalance in society.”

Saudi Arabia’s net foreign assets fell for a 15th month in April, as the kingdom announced its “vision” for a post-oil future. The Saudi Arabian Monetary Agency said on Sunday net foreign assets declined 1.1% to $572 billion, the lowest level in four years. The slump in crude prices has forced the government to sell bonds and draw on its currency reserves, still among the world’s largest. Net foreign assets fell by $115 billion last year, when the kingdom ran a budget deficit of nearly $100 billion.

The fiscal crunch has pushed Saudi Arabia’s rulers to look beyond oil, consider new taxes, and plan an initial public offering of state giant Saudi Arabian Oil Co. Deputy Crown Prince Mohammed bin Salman sketched out the planned changes dubbed Saudi Vision 2030 on April 25. The strain on reserves has also fueled speculation that the kingdom will adjust its decades-old riyal peg to the dollar. New central bank Governor Ahmed Alkholifey told Al-Arabiya on Thursday that Saudi Arabia doesn’t plan to change its exchange rate policy.

Embattled commodity trader Noble Group announced the surprise resignation of CEO Yusuf Alireza on Monday and said it planned to sell a U.S. unit to bolster its balance sheet as it seeks to regain investor confidence. Alireza, a former Goldman Sachs banker had steered Asia’s biggest commodity trader to sell assets, cut business lines and take big writedowns as it battled weak commodity markets and the fallout from an accounting dispute. “With this transformation process now largely complete, Mr. Alireza considered that the time was right for him to move on,” Noble said in a statement. It appointed senior executives William Randall and Jeff Frase as co-chief executive officers and said it would begin a sale process for Noble Americas Energy Solutions, “expected to generate both significant cash proceeds and profits to substantially enhance the balance sheet.”

Noble came under the spotlight in February last year when it was accused by Iceberg Research of overstating its assets by billions of dollars, claims which Noble rejected. Its shares have since plunged by about 75% and its debt costs have risen as the company has been hit hard by credit rating downgrades and weak investor confidence. “The first task is to stabilize the situation and convey stability and continuity,” said Nirgunan Tiruchelvam at Religare Capital Markets. “That would be the immediate task of somebody in this business which has volatility,” he said. Noble won the backing of banks earlier this month to refinance its debt. In February, Noble reported its first annual loss since 1998, battered by a $1.2 billion writedown for weak coal prices. The company’s shares slumped 65% last year, knocking it out of the benchmark Straits Times index.

Japan needs to delay increasing its sales tax until late 2019 to sustain its economic recovery, an aide to Prime Minister Shinzo Abe said Sunday. There is a possibility that such a move could trigger a general election. The government will probably hold off raising the tax because it needs to give priority to economic growth, Abe aide Hakubun Shimomura said on Fuji television. Japan’s lower house of parliament would need to be dissolved for a general election if the planned increase is delayed again, Finance Minister Taro Aso was cited by Kyodo News as saying on Sunday at a meeting of the ruling party’s members. Abe has said he’ll make a decision before an upper-house election this summer on whether to go ahead with a planned increase in the levy next April to 10%, from 8% at present.

He had previously said the matter would be decided at an appropriate time and that it would be postponed only if there was a shock on the scale of a major earthquake or a corporate collapse like that of Lehman Brothers. An increase in the levy in 2014 pushed Japan into a recession. “We have no other options but to postpone the sales-tax increase,” Shimomura said. “If the increase means a decline in tax revenue for the government, that would threaten the achievement of the goals under Abenomics.” The prime minister told Finance Minister Taro Aso and LDP’s Secretary General Sadakazu Tanigaki on Saturday to delay the sales-tax increase to October 2019, NHK reported.

Aso advised the prime minister to be cautious about the idea, NHK said. “If the tax increase is delayed, a general election is needed to put the plan to the public,” Aso was quoted by Kyodo News as saying on Sunday. Kyodo reported later that Abe doesn’t plan to call snap elections on the same day as the Upper House vote. If Abe fails to go ahead with his plan of raising the tax in April, it means his economic policies have failed and he and his cabinet members should resign to take responsibility, Tetsuro Fukuyama, vice secretary general of the opposition Democratic Party of Japan, said in a program aired by public broadcaster NHK on Sunday.

Oil slumps. Middle Eastern patients cancel treatments abroad. Thai hospital stocks slide. It’s the butterfly effect in action. Weak growth outlooks in the Gulf states are prompting greater competition from local clinics, stemming the flow of visitors to the world’s top medical tourism destination. That’s clouding the outlook for Thailand’s health-care shares, which surged more than 800% over the past seven years, as valuations start to look stretched amid the falling demand. Bangkok’s Bumrungrad Hospital, known as the grandaddy of international clinics, has slumped 16% since early March after patient volumes from the United Arab Emirates, its second-biggest source of overseas visitors, fell 20% in the first quarter.

Thailand attracted as many as 1.8 million international patients in 2015, many of whom stayed on afterward for a beach holiday. More than one in three foreigners treated at Bumrungrad are from the Gulf states and Kasikorn Securities says declining growth in the region and a rise in competition from clinics in the U.A.E., where the government is encouraging its citizens to stay home for medical care, are curbing demand. “In the short term, the economic slowdown in the the Middle East will weaken some investors’ confidence on earnings growth for domestic hospital operators,” said Jintana Mekintharanggur at Manulife Asset Management. “We are still bullish on the sector” in the long term as it will benefit from growth in countries like Myanmar and Vietnam that have less-developed health systems, she said.

The problems we face cannot be fixed with policy tweaks and minor reforms. Yet policy tweaks and minor reforms are all we can manage when the pie is shrinking and every vested interest is fighting to maintain their share of the pie. Our failure stems from a much deeper problem: we optimize what we measure. If we measure the wrong things, and focus on measuring process rather than outcome, we end up with precisely what we have now: a set of perverse incentives that encourage self-destructive behaviors and policies. The process of selecting which data is measured and recorded carries implicit assumptions with far-reaching consequences. If we measure “growth” in terms of GDP but not well-being, we lock in perverse incentives to boost ‘growth” even at the cost of what really matters, i.e. well-being.

If we reward management with stock options, management has a perverse incentive to borrow money for stock buy-backs that push the share price higher, even if doing so is detrimental to the long-term health of the company. Humans naturally optimize what is being measured and identified as important. If students’ grades are based on attendance, attendance will be high. If doctors are told cholesterol levels are critical and the threshold of increased risk is 200, they will strive to lower their patients’ cholesterol level below 200. If we accept that growth as measured by GDP is the measure of prosperity, politicians will pursue the goal of GDP expansion.

If rising consumption is the key component of GDP, we will be encouraged to go buy a new truck when the economy weakens, whether we need a new truck or not. If profits are identified as the key driver of managers’ bonuses, managers will endeavor to increase net profits by whatever means are available. The problem with choosing what to measure is that the selection can generate counterproductive or even destructive incentives. This is the result of humanity’s highly refined skill in assessing risk and return. All creatures have been selected over the eons to recognize the potential for a windfall that doesn’t require much work to reap.

If recent headlines are to be believed, we are rapidly approaching the future depicted in Wall-E, with a morbidly obese population that can get from place to place only with the help of a hover-scooter. “Americans are fatter than ever, CDC finds,” trumpets CNN. “This Many Americans Need To Go On A Diet ASAP, According To New CDC Report,” content farm Elite Daily smugly proclaims. But is it really that cut-and-dried? The report both articles refer to is succinctly titled “Early Release of Selected Estimates Based on Data from the National Health Interview Survey, 2015.” It was released on Tuesday, and it provides an early look at annual data from the titular survey on 15 different points, from health insurance and flu shots to smoking rates and, yes, obesity.

The publication says 30.4% of Americans were obese in 2015, with a 95% confidence interval (so somewhere between 29.62% and 31.27%). That’s compared to 19.4% in 1997. Obesity rates were higher among middle-aged people (ages 40 to 59), with the rate for that group hitting 34.6%. Ages 20 to 39, perhaps predictably, were the least obese, with 26.5% of that population having a BMI of 30 or more. Obesity was highest for black women (45%), followed by black men (35.1%), Latina women (32.6%), Latino men (32%), white men (30.2%) and white women (27.2%). The data in the release didn’t provide any information on other ethnic or racial groups, nor did it break obesity rates down by household income.

In concert with rising obesity rates, Americans are getting more diabetic. In 1997, 5.1% of U.S. adults had been diagnosed with diabetes. By 2015, that number had nearly doubled, to 9.5%. Although, again, the data here don’t break everything down to my satisfaction–there are no numbers for each specific type of diabetes, for instance–it’s safe to say that these correlations are the consequence of rising obesity, as 95% of people diagnosed with diabetes have type 2.

David Cameron’s hopes of being able to avoid terminal damage to Conservative party unity after the EU referendum campaign were dented on Sunday when two rebel MPs openly called for a new leader and a general election before Christmas. The attacks came from Andrew Bridgen and Nadine Dorries – both Brexiters, and longstanding, publicity-hungry opponents of the prime minister – and their claim that even winning the EU referendum won’t stop Cameron facing a leadership challenge in the summer was dismissed by fellow Tories. But their comments coincided with the ministers in charge of the leave campaign launching some of their strongest personal attacks yet on Cameron, prompting Labour’s Alan Johnson to say that the Tory infighting was getting “very ugly indeed”.

Bridgen told the BBC’s 5 Live that Cameron had been making “outrageous” claims in his bid to persuade voters to back remain and that, as a consequence, he had effectively lost his parliamentary majority. “The party is fairly fractured, straight down the middle and I don’t know which character could possibly pull it back together going forward for an effective government. I honestly think we probably need to go for a general election before Christmas and get a new mandate from the people,” he said. Bridgen said at least 50 Tory MPs – the number needed to call a confidence vote – felt the same way about Cameron and that a vote on the prime minister’s future was “probably highly likely” after the referendum.

Dorries told ITV’s Peston on Sunday she had already submitted her letter to the chairman of the Tory backbench 1922 committee expressing no confidence in the prime minister. “[Cameron] has lied profoundly, and I think that is actually really at the heart of why Conservative MPs have been so angered. To say that Turkey is not going to join the European Union as far as 30 years is a lie.”

More than one-third of the coral reefs of the central and northern regions of the Great Barrier Reef have died in the huge bleaching event earlier this year, Queensland researchers said. Corals to the north of Cairns – covering about two-thirds of the Great Barrier Reef – were found to have an average mortality rate of 35%, rising to more than half in areas around Cooktown. The study, of 84 reefs along the reef, found corals south of Cairns had escaped the worst of the bleaching and were now largely recovering any colour that had been lost. Professor Terry Hughes, director of the ARC Centre of Excellence for Coral Reef Studies at James Cook University, said he was “gobsmacked” by the scale of the coral bleaching which far exceeded the two previous events in 1998 and 2002.

“It is fair to say we were all caught by surprise,” Professor Hughes said. “It’s a huge wake up call because we all thought that coral bleaching was something that happened in the Pacific or the Caribbean which are closer to the epicentre of El Nino events.” The El Nino of 2015-16 was among the three strongest on record but the starting point was about 0.5 degrees warmer than the previous monster of 1997-98 as rising greenhouse gas emissions lifted background temperatures. Reefs in many regions, such as Fiji and the Maldives, have also been hit hard. Bleaching occurs when abnormal conditions, such as warm seas, cause corals to expel tiny photosynthetic algae, called zooxanthellae. Corals turn white without these algae and may die if the zooxanthellae do not recolonise them.

The northern end of the Great Barrier Reef was home to many 50- to 100-year-old corals that had died and may struggle to rebuild before future El Ninos push tolerance beyond thresholds. “How likely is it that they will fully recover before we get a fourth or a fifth bleaching event?” Professor Hughes said. The health of the reef has been a contentious political issue, with Environment Minister Greg Hunt pledging more funds in the May budget to improve water quality – one aspect affecting coral health. But Mr Hunt has also had to explain why his department instructed the UN to cut out a section on Australia from a report that dealt with the threat of climate change to World Heritage sites including the Great Barrier Reef and Kakadu.

China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows may accelerate as the economy slows and after some of the nation’s most-accurate forecasters predicted further declines for equities. The Shanghai Composite Index plunged 5.2% to 2,784.88 at 2:24 p.m., heading for the lowest close since December 2014, as turnover shrank. Industrial and technology companies led declines. China Shipbuilding Industry and Hundsun Technologies slumped more than 8%. Hong Kong’s Hang Seng China Enterprises Index decreased 3.2%.

Huang Weimin, whose Chinese stock-index futures wagers returned more than 6,200% last year, says the Shanghai gauge could drop another 15% in the first half as slowing economic growth and a weaker yuan fuel capital outflows. Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion, more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006. “The pressure for capital outflow and yuan’s devaluation is still quite big,” said Dai Ming, a fund manager at Hengsheng Asset Management in Shanghai, adding that he’s cutting equity holdings. “We haven’t seen signs of a pick-up in the economy and the first and second quarters could be challenging.”

China shares fell sharply Tuesday afternoon, as oil prices sunk lower, pulling down energy shares across the region. The Shanghai Composite Index was last down more than 4%, at 2815.65, on track for a fresh low since Dec. 2014. The benchmark is now off roughly 45% since its June peak. While most of the region started in the red, China shares notably deepened their losses around one hour before the 3 p.m. local market close. Investors have been wary that the government may be stepping back from heavy intervention in the stock market, after state-owned funds had been tasked last summer with buying shares. Late last year, coordinated buying had often come in the afternoon hours, sending shares surging.

Meanwhile, in Hong Kong, the energy sector plunged 5.2%, dragging down the Hang Seng Index by 1.9%. The Hang Seng China Enterprises Index of Chinese firms trading in Hong Kong dropped 2.8% at 7948.28. That benchmark hit a closing low of 7835 last Thursday, and currently trades at its lowest levels since 2009. The Nikkei Stock Average fell 2.4%, with Tokyo-listed oil developer Inpex Corp. down 4.3%, South Korea’s Kospi was down 1.2%. Markets in Australia and India are closed for holidays. The same concerns that have haunted stocks this year remain: Oil prices are trading near multiyear lows, and investors are worried about a slowing China and plans by the U.S.Federal Reserve to raise interest rates. But increasingly, the oil market is driving the action.

“The volatility [in oil] is not helping restore confidence back in the market,” said Robert Levine, head of Asian sales and trading at brokerage CLSA. “It’s not easy to put on new bets.” Brent crude oil gave up gains earlier in Asia to trade down 3.2% at $29.53 a barrel. In the U.S., prices had fallen 5.7% on Monday to $30.34 a barrel. Brent oil has now fallen more than 20% this year.

The yuan traded in Hong Kong resumed declines as risk aversion crept back into global markets, spurred by a drop in oil and lingering concern about the health of China’s economy. Brent crude headed lower for a second day, causing Asian currencies and stocks to give up gains that were triggered by optimism central banks in Japan and Europe will add to monetary stimulus. Sentiment on the yuan is still fragile and any major shocks to confidence, along with policy uncertainties could significantly compound outflows, Goldman Sachs Group Inc. economists led by MK Tang wrote in a note Tuesday. “The yuan is pressured as oil slumped, while the outlook for the global and Chinese economy isn’t strong,” said Banny Lam at Agricultural Bank of China International in Hong Kong.

“The yuan will remain relatively stable due to the possible lack of news or major support from policy makers as the Lunar New Year is approaching.” The offshore yuan fell 0.09% to 6.6152 a dollar as of 11:09 a.m. local time, data compiled by Bloomberg show. The onshore exchange rate was steady at 6.5796, according to China Foreign Exchange Trade System prices. The People’s Bank of China set its daily fixing in Shanghai little changed from Monday at 6.5548. Outflows from China increased to $158.7 billion in December, the most since September and were $1 trillion last year, according to estimates from Bloomberg Intelligence. That’s more than seven times the amount of cash that left in 2014.

China is willing and able to withstand temporary fluctuations in the exchange rate to gain independence of its monetary policy, Mei Xinyu, a researcher at China’s Ministry of Commerce, wrote in a commentary on the front page of the overseas edition of the People’s Daily Tuesday. The official Xinhua News Agency published a commentary on Saturday saying speculators entering short positions are expected to “suffer huge losses” as Chinese policy makers will take measures to stabilize the yuan. The PBOC has intervened repeatedly in the currency markets at home and abroad to damp depreciation pressure since it devalued the yuan in August. Meddling in the offshore yuan soaked up liquidity in Hong Kong this month and sent interbank lending rates to record highs, making selling short the currency costlier.

The authorities have also tightened capital controls to stem outflows, with measures including suspending foreign banks from conducting some cross-border business until March and imposing reserve-requirement ratios on yuan deposited onshore by overseas financial institutions since Monday. “Capital outflows will continue” as bets for further yuan depreciation still persist and investor confidence has been hit by policy risks, said Ken Cheung, a Hong Kong-based strategist at Mizuho Bank Ltd. “China won’t tolerate sharper yuan declines because its collapse would reinforce outflows, jeopardize China’s real economy, trigger a currency war and drag on the pace of internationalization.”

U.S. stocks halted a two-day rebound, with losses piling up in the last hour of trading as crude oil resumed a selloff that has rocked financial markets this year. Commodity-linked currencies slid as investors sought refuge in haven assets from gold to Treasuries. Energy and mining shares pushed the Standard & Poor’s 500 Index’s retreat to 1.6% as U.S. crude tumbled back below $31 a barrel, winding back a sizable chunk of Friday’s gains. Sentiment was better in emerging markets, where stocks headed for their steepest two-day advance since September on bets central banks will bolster stimulus to soothe the market turbulence. While the ruble weakened against all but one of its 31 major peers and Canada’s dollar sank, gold jumped. 10-year Treasury yields dropped five basis points.

Even after it staged a recovery late last week, crude is still nearing a 20% decline this year as brimming U.S. stockpiles and the prospect of additional Iranian exports fuel anxiety over a global glut. The slump in energy prices has also amplified concern over world growth and disinflation, as it also points to weaker industrial demand. With energy and commodity companies sliding, a measure of the correlation between global stocks and oil prices over the past 120 days has climbed to 0.5, the highest level since 2013. “Obviously investors are working through some potentially difficult issues in their minds about the state of the world economy,” said John Carey at Pioneer Investment Management. “It might might be a while before we emerge from this period of uncertainty. I’ve noticed that pattern of end-of-day volatility and wonder if there are programs that kick in at the end of the day that contribute to that.”

The S&P 500 fell to 1,877.07 as of 4 p.m. in New York, following a 2% rebound on Friday. Equities are on track for their worst January since 2009 amid concern China’s slowdown will weigh on global growth, with plunging oil prices exacerbating that angst. The U.S. benchmark sank to a 21-month low last week before rallying.

Oil and stock markets have moved in lockstep this year, a rare coupling that highlights fears about global economic growth. As oil prices tumbled early in 2016, global equities recorded one of their worst-ever starts for a new year. On Monday, oil and stocks were lower again. The S&P 500 index was down 0.7% in midday New York trading, and Brent crude futures, the global benchmark, were down $1.37 a barrel, or 4.3%, to $30.81. That followed a joint rebound on Friday. The correlation between daily moves in the price of Brent and the S&P 500 stock index is at levels not seen in the past 26 years. January isn’t over yet, but over the past 20 trading days—an average month—the correlation is 0.97, higher than any calendar month since 1990, according to data from both benchmarks examined by The Wall Street Journal.

A correlation of 1 would mean oil and stock prices move by the same proportion in the same direction, while a correlation of minus 1 would mean they move proportionally in opposite directions. The unusually strong link between the two markets partly reflects a common theme driving both: fears that a slowing Chinese economy could tip the global economy into recession. But as traders and investors in each market look at the other for clues as to how bad things are, they have exacerbated the overall bearish mood. The recent pattern marks a shift in the dynamics of oil’s 19-month collapse. Traders who long worried that the oil market was suffering from oversupply are now growing concerned that demand may be weakening as well.

“There is a vicious-cycle mentality among investors,” said François Savary, chief investment officer at Prime Partners, a Swiss investment firm managing $2.6 billion of assets. “It has become self-sustaining.” Even in the oil-rich Middle East, the mood has changed. In Dubai, businessman Ramesh Manglani never used to look at the oil price when investing in equity, despite the influence of energy in the region and its companies. “Everything’s changed since last year,” Mr. Manglani said, after investing in stocks for nearly a decade. “First thing in the morning we now check oil prices and Asian markets.”

One year ago, analysts at Bank of America Merrill Lynch drew a parallel between the subprime mortgage crash and the disorderly fall in the price of oil. Led by Chris Flanagan, a veteran of the securitization space, the team drew attention to Markit’s ABX Index, better known as the mother of all synthetic subprime credit indexes. Created in January 2006 and consisting of a basket of credit default swaps (CDS) tied to the welfare of subprime mortgages, it allowed a bevy of investors to bet on the future direction of riskier home loans and helped inflate the massive amounts of leverage tied to the U.S. housing bubble.

More recently it played a starring role in the film version of Michael Lewis’s The Big Short—when protagonists Christian Bale, Steve Carell, et al. are tracking their bets against the U.S. housing market, they are tracking the ABX. Fast-forward to today and the BofAML analysts provide an update to their previous thesis, which was that the downward spiral in the price of oil was shaping up to look a lot like the negative trend that engulfed the subprime space circa the year 2007. Here’s what they say:

“The pattern of the decline in the price of oil that began in mid-2014 is remarkably similar to the 2007-2009 pattern of the price decline of ABX, the credit derivative index that referenced subprime mortgages and, ultimately, the U.S. housing market (Chart 1). The ABX history suggests that oil will see more declines in the next couple of months and find a floor somewhere in the low 20s in the March-April time frame. Both the duration of the decline (1.5+ years) and the scale of the decline (100 neighborhood starting price down to the sub-30 neighborhood) are similar. Given that both housing and oil prices were fueled to spectacular heights in the two periods by massive credit expansion, it’s probably more than just coincidence that the respective “bubble” bursting patterns are so similar.

Consider how things tend to work. Denial on what constitutes fair value is a big component of bubbles, on the part of both market participants and policymakers. When perceived “bubbles” burst, markets take their time in steadily shredding views of the perception of fundamental value, as prices move lower and lower. Along the way, many will cite “technical factors” as the cause of the decline, which in some way suggests the price decline may not be real when in fact it is all too real. In the end, the technicals drive the fundamentals, as credit flees and borrowers go bust, and a feedback loop lower kicks in. Lower prices beget accelerated selling, as asset owners need to raise cash. It could be margin calls or it could be producer selling needs, it doesn’t really matter: the selling becomes inevitable and turns into forced selling.”

The point here is not that oil is necessarily the new subprime crisis per se but that the recent action in the price of crude resembles nothing if not the bursting of a bubble and the sudden realization that the asset has been overvalued for too long. More worrying for oil investors will be BofAML’s idea of forced selling. As Flanagan notes: “The systemic margin call of 2008 seems to be back for now, albeit to a far lesser degree.”

Chinese officials readily admit that communication has not been their strong point when it comes to dealing with international investors. The question of how China manages the renminbi is critical for global trade and commodity prices; the market turmoil following recent changes in the currency regime was exacerbated by Beijing’s failure to explain its intentions. Policymakers have now made it explicit that they have no wish to engineer a big devaluation. However, they are much less forthcoming about how they plan to reconcile a desire for currency stability with the realities of capital flight and a slowing economy. Greater clarity would be a help to investors, who struggle at present to interpret cryptic press releases and gauge the extent of central bank intervention in markets. However, improving communication by the People’s Bank of China is not an easy matter.

In a system where even the central bank governor cannot speak with complete authority — given political constraints and resistance to its reformist policies in other parts of the Chinese state — it would constitute a revolution. Moreover, central bank guidance is most effective when the policy is clear and it is relatively straightforward to work out how it will evolve in response to changes in economic data. At present, the reality in China is that the PBoC has no clear course of action and wants to leave itself flexibility. No amount of clarification wouldhelp to varnish the underlying problem: capital flight. The corruption clampdown and a lack of investment opportunities at home are driving Chinese people to take their money out of the country, just as the prospect of higher US interest rates is prompting companies to pay off dollar debt.

Fear of a devaluation has fuelled the outflows. Far from seeking a weaker renminbi, the central bank has been forced to spend a big chunk of its reserves to prop it up. Given this continuing pressure, Chinese policymakers have few attractive options. Even with a $3.3tn stockpile, they cannot continue to run down foreign exchange reserves indefinitely, nor would the government countenance it. Raising interest rates to make domestic investments more attractive would be unlikely to slow outflows while worsening the already painful slowdown in the real economy. Letting the renminbi find its own level — while intellectually coherent — risks enormous market dislocation in the short term and would be a huge shock to the global economy. Few policymakers either within China or outside are likely to contemplate such a course.

When the financier George Soros attacked the British pound in 1992 and famously “broke the Bank of England” he was trading on a conviction that the currency was misaligned. Britain devalued after squandering its reserves in a vain defense. Mr. Soros walked off with $1 billion or more. To the surprise of many, though, the U.K. economy soon picked up once the pound found its proper level. China’s raging battles with currency speculators are unlikely to end as happily for the country. That’s because turmoil in the currency markets reflects a much more perilous imbalance than an overvalued yuan: China is now lopsidedly dependent on ever larger inputs of local bank credit to keep sputtering growth from declining further.

The country is already littered with “zombie” factories, empty apartment blocks that form ghostly suburbs, mothballed power stations and other infrastructure that nobody needs. But yet more wasteful projects are in the pipeline, even as the government talks about cutting industrial overcapacity. “That’s the misalignment—everything else is noise,” says Rodney Jones, the Beijing-based principal of Wigram Capital Advisors, who was a partner at Soros Fund Management during the 1990s. If debt keeps piling up at the current rate, China faces an eventual financial crisis, perhaps leading to years of subpar growth, mirroring the fate of Japan after its bubble burst in the early 1990s.

Mr. Jones argues that global equity markets haven’t property adjusted to this risk, even after a 16% decline in U.S. dollar terms from their May peak. “The world will have to learn to live without demand from China,” he says. “It’ll come as a shock.” A sharp devaluation won’t fix these distortions, and might even make matters worse if, as likely, it were to trigger financial mayhem in China’s trading partners. An alternative—further clamping cross-border currency controls—would be a humiliating retreat from Beijing’s policy of making the yuan more international.

China’s capital outflows jumped in December, with the estimated 2015 total reaching $1 trillion, underscoring the scale of the battle facing policy makers trying to hold up the yuan amid slower economic growth and slumping stocks. Outflows increased to $158.7 billion in December, the second-highest monthly outflow of the year after September’s $194.3 billion, according to estimates compiled by Bloomberg Intelligence. The total for the year soared more than seven times from $134.3 billion in the whole of 2014 to a record for Bloomberg Intelligence data dating back to 2006. December’s outflows increased by almost $50 billion from a month earlier after the central bank unnerved markets by saying it would refocus the yuan’s moves against a wider basket of currencies rather than the dollar.

In addition to capital exiting the economy, exporters are holding funds in dollars instead of converting them to yuan, said Tom Orlik, Bloomberg’s chief Asia economist in Beijing. “The immediate trigger for a pickup in capital outflows toward the end of the year was the People’s Bank of China’s poor communication over its shift in currency policy,” said Mark Williams, chief Asia economist for Capital Economics Ltd. in London, who previously worked on China issues at the U.K. Treasury. “Outflows are likely to remain strong because the People’s Bank still has not been able to generate confidence among investors that it knows what it’s doing or that it’s able to achieve its policy objectives.” China’s cross-border capital flow risks are controllable and the nations’ foreign exchange reserves are ample to help it defend against external shocks, the State Administration of Foreign Exchange said on its website Jan. 21.

China’s foreign exchange reserves are seen tumbling $300 billion this year to the $3 trillion level some analysts say risks undermining confidence in the central bank’s ability to defend the currency, according to a Bloomberg News survey. Policy makers have been burning through reserves to reduce yuan volatility as the currency lost its status as a one-way bet on appreciation amid the slowest economic growth in a quarter century and an unexpected devaluation in August. The stockpile of reserves plunged $513 billion last year to $3.33 trillion, the first annual drop since 1992. Outflows spiked in September and December after currency policy changes caught markets by surprise, said Williams.

China’s business confidence and recruitment activity slipped to record lows in January, a survey showed, adding to signs of weakness in the world’s second-largest economy that could prod policymakers to roll out more support measures. The Sales Managers’ Index, compiled by London-based World Economics, fell to 51.0 in January from 51.7 in December. “The Headline SMI index fell slightly in January, but continues to suggest ongoing, albeit modest growth in economic activity,” World Economics Chief Executive Ed Jones said.

The index has averaged 51.4 since the second half of last year, indicating China’s economic activity is still growing steadily, albeit at a much slower rate than a year ago. The Sales Managers’ Index covers all private sectors of the economy. It is designed to reflect overall economic growth, bringing together the average movement of Confidence, Market Expansion, Product Sales, Prices Charged and Staffing Indices. The staffing index fell to 50.3 in January, near the 50 no-change mark, from 50.8 in December, hitting its lowest since the survey began, as businesses have become more hesitant to recruit as economic activity weakens, the survey showed.

Nearly seven years after the Great Recession, millions of Americans are stuck in a financial rut. Home ownership rates are at an historic low, renters are burdened by rising rents and — even though unemployment has fallen considerably in recent years — the percentage of underemployed Americans is twice those who are unemployed, according to the “2016 Assets & Opportunity Scorecard” released Monday by the Corporation for Enterprise Development, a nonprofit group in Washington, D.C. focused on expanding opportunity for low-income households. It assessed the 50 states and the District of Columbia on 61 measurements spanning financial assets and income, businesses and jobs, housing, health care and education. It also ranked these states on 69 policies that promote financial security.

Building up even a small amount of savings is a challenge. In fact, 44% of households are “liquid asset poor,” meaning they have less than three months of savings to live above the poverty level if they suffer a loss of income, the report notes, echoing the findings in several recent surveys on American savings. “Housing expense reduces income to pay for food, doctors and child care, leaving bills that can’t be paid on time and forcing consumers to take on high-cost, short-term loans,” it adds. (Over half of renters spend more than 30% of their gross income on rent, the traditional measure of affordability, according to data released last year by Harvard University’s Joint Center for Housing Studies.) Among the other key highlights, home ownership rates are hovering at just under 64% in the final quarter of 2015, still near the lowest level in three decades.

And while the national unemployment rate has fallen to 5% in December 2015, down from a recent high of 10% in October 2009, the underemployment rate was nearly 9.9% in December 2015, showing that people are still struggling to find full-time employment. “What’s more, one-in-four jobs are in a low-wage occupation,” the report adds. (On a more positive note, the government recently said more than 11 million people had signed up for the Affordable Care Act, including 4 million under the age of 35.)

Americans are still struggling to regain their pre-recession wealth and the scorecard estimates that this is far worse for people of color. Households of color are 2.1 times more likely to live below the federal poverty level and 1.7 times more likely to lack liquid savings, it says. “Those who once enjoyed a modicum of financial stability have settled into a new normal of ongoing financial vulnerability, while the struggles of those who were financially insecure before the recession have only deepened,” the authors write. “The number of households below the poverty line has barely budged and millions of low- and moderate-income people live paycheck to paycheck.”

Does anyone remember the national debt? Judging from the presidential campaign so far, perhaps we should put the debt’s image on a milk carton somewhere. In the last Republican debate, there was precisely one question on the debt — and the candidates answered it by talking about their tax plans. That was far too typical. According to the FiveThirtyEight website, “the deficit” was mentioned an average of two times in the first five televised Republican debates (including the “undercard” debates) by all the candidates — and the moderators — combined. And “the national debt” was brought up an average of 6.5 times. This compares to an average of 3.2 “deficit” mentions and 10.9 “debt” mentions in the 20 GOP debates during the 2012 campaign.

But while the candidates have been wrangling over such vital issues as fantasy sports betting or Ted Cruz’s citizenship status, our growing sea of red ink has quietly risen toward $19 trillion. One might think our impending national bankruptcy might be worth a bit more attention. In his State of the Union address, President Obama took a bow for reducing our annual budget deficit by two-thirds during his time in office. He’s correct. Since its high of $1.4 trillion in 2009, the deficit had dropped to just $439 billion last year, although the president failed to mention that his policies, including the 2009 stimulus bill, helped drive the deficit to those record levels, and policies that he opposed, such as sequestration, helped bring it down.

But the respite is just temporary. According to the Congressional Budget Office’s newest estimates, released yesterday, the deficit is already rising again, and will exceed $544 billion this year. By 2022, just six years from now, we will once again be experiencing trillion-dollar deficits every year. And even with lower deficits, the national debt is still rising. By 2025, our debt will top $27 trillion. Yet, Congress is not only kicking the can down the road, it is making the problem worse. Just last year, Congress put in place spending that will raise the debt by $1.2 trillion over the next ten years. The Committee for a Responsible Federal Budget called 2015 “a banner year for fiscal irresponsibility.” And none of this includes the more than $69 trillion in unfunded liabilities being run up by Medicare and Social Security. But out on the campaign trail? Crickets.

The total value of all developed real estate on the globe reached US$217 trillion in 2015, according to calculations by international real estate adviser, Savills. The analysis, published today for the first time, measures the entire developed property universe including commercial and residential property as well as forestry and agricultural land. The value of global property in 2015 amounted to 2.7 times the world’s GDP, making up roughly 60% of mainstream global assets and representing an important store of national, corporate and individual wealth. Residential property accounted for 75% of the total value of global property.

Yolande Barnes, head of Savills world research, comments: “To give this figure context, the total value of all the gold ever mined is approximately US$6 trillion, which pales in comparison to the total value of developed property by a factor of 36 to 1. “The value of global real estate exceeds – by almost a third – the total value of all globally traded equities and securitised debt instruments put together and this highlights the important role that real estate plays in economies worldwide. Real estate is the pre-eminent asset class which will be most impacted by global monetary conditions and investment activity and which, in turn, has the power to most impact national and international economies.” In recent years, quantitative easing and resulting low interest rates have suppressed real estate yields and fuelled high levels of asset appreciation globally.

Investment activity and capital growth has swept around the major real estate markets of the world and led to asset price inflation in many instances. Overall, the biggest and most important component of global real estate value is the homes that people live in, totalling US$162 trillion. The sector has the largest spread of ownership with approximately 2.5 billion households and is most closely tied with the fortunes of ordinary people. Residential real estate value is broadly distributed in line with the size of affluent populations: China accounts for nearly a quarter of the total value, containing nearly a fifth of the world’s population. Yet the weight of value lies with the West, over a fifth (21%) of the world’s total residential asset value is in North America despite the fact that only 5% of the population lives there.

First-time homebuyers are finally jumping into the U.S. property market. Need proof? Look at the mortgage market’s fastest-growing segment: loans with low down payments insured by the Federal Housing Administration. Originations of FHA-backed mortgages, used predominately by first-time buyers, were up 54% in September from a year earlier, according to the most recent data from CoreLogic. By December, the FHA insured 22% of all loan originations, up from 17% a year earlier, according to data compiled by Ellie Mae. “The FHA will be a contributing factor to homeownership rising again in America,” said David Lykken, president and founder of Transformational Mortgage Solutions in Austin, Texas. “We’re seeing the return of first-time buyers.”

President Barack Obama’s administration, in January 2015, reduced mortgage-insurance premiums for FHA loans. That lowered the cost of getting a home loan and brought in at least 75,000 new borrowers with credit scores of less than 680, according to a November report from the U.S. Department of Housing and Urban Development. The rate of FHA lending, which had been in decline through most of 2014, tripled the month after the insurance premium was cut, according to CoreLogic. The FHA estimates that borrowers save $900 a year on average as a result of the lower premium. The move made FHA-backed mortgages more competitive with other loans that have low-down-payment options, said Guy Cecala, publisher of the newsletter Inside Mortgage Finance.

While mortgage giants Fannie Mae and Freddie Mac have an option for borrowers to put down as little as 3%, they require private insurance with risk-adjusted premiums based on credit scores, debt-to-income ratios and other factors. “It still costs more to get a 3%-down loan with Fannie and Freddie if you have a lower FICO score,” Cecala said. The homeownership rate in the third quarter was 63.7%, up from 63.4% in the previous three months and the first quarterly rise in two years, according to the U.S. Census Bureau, which is scheduled to release fourth-quarter data next week. “Last year’s decision to lower premiums was designed to open the door to those previously priced out of homeownership,” HUD Secretary Julian Castro said in an email. “We’ve seen positive results with new buyers entering the market and making the American dream of homeownership a reality.”

The Town’n Country grocery in Oriental, North Carolina, a local fixture for 44 years, closed its doors in October after a Wal-Mart store opened for business. Now, three months later — and less than two years after Wal-Mart arrived — the retail giant is pulling up stakes, leaving the community with no grocery store and no pharmacy. Though mom-and-pop stores have steadily disappeared across the American landscape over the past three decades as the mega chain methodically expanded, there was at least always a Wal-Mart left behind to replace them. Now the Wal-Marts are disappearing, too. “I was devastated when I found out. We had a pharmacy and a perfectly satisfactory grocery store. Maybe Wal-Mart sold apples for a nickel less,” said Barb Venturi, mayor pro tem for Oriental, with a population of about 900.

“If you take into account what no longer having a grocery store does to property values here, it is a significant impact for us.” Oriental is hardly alone. Wal-Mart said on Jan. 15 it would be closing all 102 of its smaller Express stores, many in isolated towns, to focus on its supercenters and mid-sized Neighborhood Markets. The move, which will begin by the end of the month, was a relatively quick about-face. As recently as 2014, Wal-Mart was touting the solid performance of its smaller stores and announced plans to open an additional 90. That’s a big problem for small towns, often with proportionately large elderly populations. For the older folks of Oriental – a retirement and summer vacation town along the inter-coastal waterway – the next-nearest grocery and pharmacy is a 50-minute round-trip drive.

Wal-Mart says it is sensitive to the dislocations its business decisions are causing. “In towns impacted by store closures, we have had hundreds of conversations with elected officials and community leaders to discuss relevant issues and we are working with communities on how we can be helpful,” said Wal-Mart spokesman Brian Nick. Wal-Mart has been under increasing pressure lately as sales in the U.S. have failed to keep up with rising labor costs. It’s also been spending more on its Web operations. In October, the company announced that profit this year would be down as much as 12%. The outlook contributed to a share decline of 29% during the past 12 months. “It is more important now than ever to review our portfolio and close the stores and clubs that should be closed,” Wal-Mart’s Chief Executive Officer Doug McMillon said in a statement on the company’s website.

For the first new refinery in the U.S. in seven years, the idea was simple: Buy cheap oil from shale producers, then score a quick profit by selling it right back to them as more expensive diesel needed to power their trucks and drilling rigs. Now the shale bust is threatening to ruin a renaissance in small refineries, known as teapots, before it even begins. When Dakota Prairie Refining was building its plant in 2014, it could buy some of the cheapest oil in America and sell among the most expensive diesel in America. But the oil bust obliterated its local diesel market, along with the fat premium the fuel used to fetch, as its potential customers shut down operations.

In the fall of 2014, when tiny Dakota Prairie was getting ready to open its processing plant in Dickinson, North Dakota, diesel fuel near the state’s Bakken oil fields sold for $100 a barrel more than the oil produced there. Now it’s selling for just $16 a barrel more. “The last thing you want to be doing right now is running a refinery that makes a lot of diesel and very little gasoline,” said Robert Campbell at Energy Aspects. It’s a “double whammy,” he said, as the diesel market weakens worldwide and demand in their specific local market plunges. Dakota Prairie lacks the pipelines and storage units a larger refiner uses to sell to customers farther away, and it’s not equipped to make vehicle-ready gasoline instead of diesel. “These guys don’t have alternative markets, and they don’t have a lot of competitiveness to export, so they’re pretty stuck,” Campbell said.

While the Washington snowstorm dominated news coverage this week, Senate Majority Leader Mitch McConnell was operating behind the scenes to rush through the Senate what may be the most massive transfer of power from the Legislative to the Executive branch in our history. The senior Senator from Kentucky is scheming, along with Sen. Lindsey Graham, to bypass normal Senate procedure to fast-track legislation to grant the president the authority to wage unlimited war for as long as he or his successors may wish. The legislation makes the unconstitutional Iraq War authorization of 2002 look like a walk in the park. It will allow this president and future presidents to wage war against ISIS without restrictions on time, geographic scope, or the use of ground troops. It is a completely open-ended authorization for the president to use the military as he wishes for as long as he (or she) wishes.

Even President Obama has expressed concern over how willing Congress is to hand him unlimited power to wage war. President Obama has already far surpassed even his predecessor, George W. Bush, in taking the country to war without even the fig leaf of an authorization. In 2011 the president invaded Libya, overthrew its government, and oversaw the assassination of its leader, without even bothering to ask for Congressional approval. Instead of impeachment, which he deserved for the disastrous Libya invasion, Congress said nothing. House Republicans only managed to bring the subject up when they thought they might gain political points exploiting the killing of US Ambassador Chris Stevens in Benghazi.

It is becoming more clear that Washington plans to expand its war in the Middle East. Last week the media reported that the US military had taken over an air base in eastern Syria, and Defense Secretary Ashton Carter said that the US would send in the 101st Airborne Division to retake Mosul in Iraq and to attack ISIS headquarters in Raqqa, Syria. Then on Saturday, Vice President Joe Biden said that if the upcoming peace talks in Geneva are not successful, the US is prepared for a massive military intervention in Syria. Such an action would likely place the US military face to face with the Russian military, whose assistance was requested by the Syrian government. In contrast, we must remember that the US military is operating in Syria in violation of international law.

The number of children under five who are overweight or obese has risen to 41 million, from 31 million in 1990, according to figures released by a World Health Organisation commission. The statistics, published by the Commission on Ending Childhood Obesity, mean that 6.1% of under-fives were overweight or obese in 2014, compared with 4.8% in 1990. The number of overweight children in lower middle-income countries more than doubled over the same period, from 7.5 million to 15.5 million. In 2014, 48% of all overweight and obese children aged under five lived in Asia, and 25% in Africa. The expert panel, commissioned by the WHO, said progress in tackling the problem had been “slow and inconsistent” and called for increased political commitment, saying there was a “moral responsibility” to act on behalf of children.

Peter Gluckman, a co-chair of the commission, said childhood obesity had become “an exploding nightmare” in the developing world. He added: “It’s not the kids’ fault. You can’t blame a two-year-old child for being fat and lazy and eating too much.” The report’s authors said that addressing the problem must start before the child is conceived and continue into pregnancy, through to infancy, childhood and adolescence. They pointed out that where a mother entering pregnancy is obese or has diabetes, the child is predisposed “to increased fat deposits associated with metabolic disease and obesity”. Many children are growing up in environments encouraging weight gain and obesity, they observed. “The behavioural and biological responses of a child to the obesogenic environment can be shaped by processes even before birth, placing an even greater number of children on the pathway to becoming obese when faced with an unhealthy diet and low physical activity,” they said.

The trend for increasingly extreme and frequent weather matching climate change forecasts has been put into stark perspective by the latest data while the economic impact of one of the strongest El Nino’s on record is acting as a red warning light of worse to come, if the world does not act fast enough to cut the concentrations of greenhouse gases in the atmosphere. Drawing on consolidated analysis of the world’s major meteorological agencies, the World Meteorological Organization (WMO) has confirmed that the global average surface temperature in 2015 broke all previous records by a wide margin. For the first time on record, temperatures in 2015 were about 1°C above the pre-industrial era.

The WMO says that the fifteen of the 16 hottest years on record have all been this century, with 2015 being significantly warmer than the record-level temperatures seen in 2014. Underlining the long-term trend, 2011-15 is the warmest five-year period on record. The news comes as Asia is experiencing unusually cold weather and the United States a major blizzard, a sobering reminder that climate change is about extreme impacts from all kinds of weather as the weather systems we have taken for granted for so long shift into more chaotic patterns under the influence of the greenhouse effect.

No single weather event can be attributed to climate change but the frequency and intensity of extreme weather events is increasing as predicted as global average temperatures rise, and this will have severe economic implications. For example, a warmer world means fewer days of snowfall, but heavier snowfall on those days when it does snow. This is because snow requires moist air, and a warmer atmosphere holds more moisture.

The European Union edged closer on Monday to accepting that its Schengen open-borders area may be suspended for up to two years if it fails in the next few weeks to curb the influx of migrants from the Middle East and Africa. Shorter-term dispensations for border controls end in May. EU migration ministers meeting in Amsterdam decided they may be extended for two years – an unprecedented extension – because the migrant crisis probably will not be brought under control by then, according to the Dutch migration minister, who chaired the meeting. Some ministers made clear such a – theoretically temporary – move would cut off Greece, where more than 40,000 people have arrived by sea from Turkey this year, despite a deal with Ankara two months ago to hold back an exodus of Syrian refugees.

More than 60 have drowned on the crossing since Jan. 1. Greek officials noted that closing routes northward, even if physically possible, would not solve the problem. But electoral pressure on governments, including in the EU’s leading power Germany, to stem the flow and resist efforts to spread asylum seekers across the bloc are making free-travel rules untenable. “We are running out of time,” said EU Migration Commissioner Dimitris Avramopoulos. He urged states to implement agreed measures for managing movements of migrants across the continent — or else face the collapse of the 30-year-old Schengen zone.

But the Dutch minister, Klaas Dijkhoff, said time has effectively already run out to preserve the passport-free regime. The system has allowed hundreds of thousands of people to make chaotic treks from Greece and Italy to Germany and Sweden over the past year. “The ‘or else’ is already happening,” he said. “A year ago, we all warned that if we don’t come up with a solution, then Schengen will be under pressure. It already is.” Under pressure from domestic opinion, several governments have already reintroduced controls at their borders with fellow EU states. Those controls should be better coordinated, said Dijkhoff, whose government last year floated the idea of a “mini-Schengen”, which critics saw as a way for Germany and its northern neighbours to bar the influx from the Mediterranean.

Greece has hit back at European proposals for tightened security on its northern border with Macedonia, describing the latest plans to staunch the flow of refugees into Europe as a dangerous experiment that would traumatise the country. The proposals to dispatch joint police forces along Macedonia s border with Greece first outlined in a letter sent by Miro Cerar, prime minister of Slovenia, to fellow EU leaders last week have gained political momentum ahead of a meeting of EU interior ministers in Amsterdam on Monday. The plan seeks to shift the frontline of Europe’s refugee control efforts to the northern part of Greece, where the government is already straining to manage the influx with limited resources.

A Slovenian government statement on Friday claimed the proposal would allow an end to internal Schengen border controls and said it had received strong backing from central European countries, including Hungary and Poland, while positive signals had been received from Brussels. EU officials were in Macedonia on Friday to assess conditions on the ground ahead of Monday s talks. A letter from Jean Claude Juncker to Slovenian Prime Minister Miro Cerar, seen by the Financial Times, shows that the European Commission has outlined its backing for the plan.

“I welcome your suggestion that all EU member states should provide assistance to the Former Yugoslav Republic of Macedonia authorities to support controls on the border with Greece through the secondment of police/law enforcement officers, and the provision of equipment”, the commission president wrote. Mr Juncker reiterated that EU countries have the right to block entry to people who do not want to apply for asylum in that country in order to apply elsewhere in Europe. “Member states should indeed refuse entry at the external border to third-country nationals who do not satisfy the entry conditions, including third-country nationals who have not made an asylum application despite having had the opportunity to do so”.

But Ioannis Mouzalas, Greece’s minister for migration, said ringfencing Greece from the Schengen zone would not stop asylum seekers making their way to northern Europe, adding that Athens had not been consulted on the plan in advance. Instead, Mr Mouzalas called for greater assistance for Turkey to help it reduce the numbers crossing the Aegean Sea to Greece. More than 2,000 asylum seekers arrive from Turkey each day before making the journey overland to the EU through the western Balkans. “It’s not easy to trap [asylum seekers] and we do not intend to become a cemetery of souls here. We cannot understand what kind of policy it is that a country would close its borders with Greece,” he said on Sunday evening. “We do not have time to experiment with things that will only worsen the trauma.”

Tumbling oil prices and a stronger dollar are pushing down U.S. corporate profits for the first time in more than five years, hurting companies from Exxon Mobil to Wal-Mart. First-quarter earnings per share for companies in the S&P 500 may have fallen about 5.8%, according to estimates compiled by Bloomberg, in the first year-over-year decline since 2009’s third quarter. As earnings season gets its unofficial start this week with Alcoa, the biggest drag will come from a 63% profit decline at energy companies. Oil prices have fallen by about half from a year ago as companies pumped their way into a global glut, and the dollar’s climb of about 25% against a basket of currencies since last summer has chipped away at revenue for companies such as United Technologies.

“There are all these cross currents going on right now heading into earnings season,” said Todd Lowenstein at HighMark Capital. “You’re going to have at least on paper a technical earnings recession, meaning two consecutive quarters of negative growth, in the first and second quarters.” The effects ripple across industries. US Steel last month announced plans to shut an Illinois mill partly on falling demand from the energy companies. The dollar’s surge helped make steel imports cheaper, hurting producers such as Nucor. At Dow Chemical profit is poised to drop as plastics prices decline with oil and farmers buy fewer chemicals because their crops are selling for less. United Technologies has said it expects foreign exchange to cut $100 million from first-quarter profit on sales of its jet engines, elevators and air conditioners. “That still remains the biggest watch item for me,” CFO Akhil Johri told investors on March 12.

The slowdown is showing in some U.S. economic reports. The Labor Department reported Friday that employers added 126,000 jobs in March, the fewest since December 2013. The S&P 500 fell 0.3% at 9:38 a.m. Monday in New York, the first trading day after the report. Once energy companies are pulled out of the picture, S&P earnings look a bit better, with a projected rise of 1.9%. Alcoa is poised to report a higher profit in part because of rising aluminum demand from automakers and airlines – – two industries that are both benefiting from lower oil prices. Profits at auto manufacturers and their suppliers may jump 42%, the estimates show. “People know that energy prices are down, they know the dollar’s up,” said Jim Paulsen at Wells Capital. “What is less known here is what does the earnings performance look like outside the energy industry.”

According to a new study from Princeton University, American democracy no longer exists. Using data from over 1,800 policy initiatives from 1981 to 2002, researchers Martin Gilens and Benjamin Page concluded that rich, well-connected individuals on the political scene now steer the direction of the country, regardless of – or even against – the will of the majority of voters. America’s political system has transformed from a democracy into an oligarchy, where power is wielded by wealthy elites. “Making the world safe for democracy” was President Woodrow Wilson’s rationale for World War I, and it has been used to justify American military intervention ever since. Can we justify sending troops into other countries to spread a political system we cannot maintain at home?

The Magna Carta, considered the first Bill of Rights in the Western world, established the rights of nobles as against the king. But the doctrine that “all men are created equal” – that all people have “certain inalienable rights,” including “life, liberty and the pursuit of happiness” – is an American original. And those rights, supposedly insured by the Bill of Rights, have the right to vote at their core. We have the right to vote but the voters’ collective will no longer prevails. In Greece, the left-wing populist Syriza Party came out of nowhere to take the presidential election by storm; and in Spain, the populist Podemos Party appears poised to do the same. But for over a century, no third-party candidate has had any chance of winning a US presidential election. We have a two-party winner-take-all system, in which our choice is between two candidates, both of whom necessarily cater to big money. It takes big money just to put on the mass media campaigns required to win an election involving 240 million people of voting age.

In state and local elections, third party candidates have sometimes won. In a modest-sized city, candidates can actually influence the vote by going door to door, passing out flyers and bumper stickers, giving local presentations, and getting on local radio and TV. But in a national election, those efforts are easily trumped by the mass media. And local governments too are beholden to big money. When governments of any size need to borrow money, the megabanks in a position to supply it can generally dictate the terms. Even in Greece, where the populist Syriza Party managed to prevail in January, the anti-austerity platform of the new government is being throttled by the moneylenders who have the government in a chokehold. How did we lose our democracy? Were the Founding Fathers remiss in leaving something out of the Constitution? Or have we simply gotten too big to be governed by majority vote?

Canada’s central bank will eventually join global peers by cutting interest rates to zero to revive flagging output, said Fidelity Investments’ David Wolf. The world’s 11th-largest economy is hobbled by weak oil prices, indebted consumers and a currency that remains too strong to draw new business investment, Wolf, a former Bank of Canada adviser under Mark Carney, said Monday from Toronto. Stephen Poloz, Carney’s successor, already cut rates once in January to 0.75% as “insurance” against plummeting crude prices. Swaps trading shows investors are betting on just one more rate cut this year. That probably won’t be enough for Canada to avoid becoming mired in weak global demand like other major economies have, Wolf said.

“There’s a reason why rates are zero just about everywhere else in the developed world,” Wolf, who co-manages the C$7.4 billion Canadian Asset Allocation Fund, said. In Canada, zero rates are “what eventually will happen” as well, he said. The Bank of Canada makes its next interest-rate decision on April 15. Carney cut the benchmark overnight lending rate to 0.25% in April 2009, saying it was effectively zero, and laid out principles for potential quantitative easing. Canada never joined the U.S., Europe and Japan in using that unconventional policy of asset purchases.

Given the unprecedented experience global central banks have had with QE since the financial crisis, and with pushing policy rates to zero or even lower, Canada would need to revisit its 2009 guidelines if policy makers decided to pursue extraordinary stimulus, Wolf said. “No doubt the bank would take a fresh look at what options would be appropriate,” he said. Canada’s dollar is at “roughly fair value” today, Wolf said, and needs to weaken further before companies are encouraged to make new investments to expand locally. The currency traded at C$1.2463 against its U.S. counterpart at 2:02 p.m. in Toronto, and is down about 6.8% this year. “Just going from overvalued to fair valued historically hasn’t been enough to prompt those changes and I don’t think will be in this case either,” he said.

Greek Finance Minister Yanis Varoufakis has unveiled his plan on reviving the Greek economy by both meeting the IMF requirements and circuiting the austerity measures. A preliminary agreement over proposal is expected on April 24. “Negotiations [with international lenders – Ed.] will be completed when we come to a decent agreement that will give a real prospect of stabilization and further substantial growth to the Greek economy,”Varoufakis said in an interview to Naftemporiki newspaper published Monday. The minister also noted that his Cabinet won’t agree to carry out measures leading to a recession. Greece requires a new agreement with Europe to make its €324-billion debt sustainable, as now it accounts for 178% of GDP, said Varoufakis pointing out five terms on which the plan is expected to work out.

First, it is a reasonable level of primary budget surplus about 1.5% of GDP instead of 4.5% agreed by the previous government which has led to a severe recession. Secondly, it is a reasonable debt restructuring that will link payments with the growth rate of nominal GDP. In addition, Greece needs an investment package from the European Investment Bank and the European Investment Fund, which should be placed mainly in the private sector in accordance with the new, non-bureaucratic procedures. Fourth, Greece should pass on effective restructuring of troubled loans by allocating them to a ‘Bad Bank’ unlike other resources of the Fund for financial stability. The fifth thing is significant reforms that will give support to creative people and businesses that produce tradable goods, with export prospects, he added.

Greece expects to reach a preliminary agreement with creditor countries on financing the economy and the external debt at a meeting of eurozone finance ministers on April 24, Varoufakis said. “Preliminary results will be achieved at the meeting of the Eurogroup on April 24,” he said adding that Greece expects to negotiate the unblocking of the last tranche of €7.2 billion from the EU loan program, and to negotiate restructuring of external debt by June.

Greece’s deputy finance minister has said that Germany owes it nearly €279bn (£205bn) in reparations for the Nazi occupation of the country. Greek governments and private citizens have pushed for war damages from Germany for decades but the Greek government has never officially quantified its reparation claims. A parliamentary panel set up by Alexis Tsipras’s government started work last week, seeking to claim German debts, including war reparations, the repayment of a so-called occupation loan that Nazi Germany forced the Bank of Greece to make and the return of stolen archaeological treasures.

Speaking at a parliamentary committee on Monday, the deputy finance minister, Dimitris Mardas, said Berlin owed Athens €278.7bn, according to calculations by the country’s general accounting office. The occupation loan amounts to €10.3bn. The campaign for compensation has gained momentum in the past few years as the Greeks have suffered hardship under austerity measures imposed by the EU and IMF in exchange for bailouts totalling €240bn to save Greece from bankruptcy. Tsipras has frequently blamed Germany for the hardship stemming from the imposition of austerity. The Greek prime minister has angered Berlin by threatening to push for reparations in the middle of talks to unlock aid for Greece. Germany has repeatedly rejected the country’s claims and says it has honoured its obligations, including a 115m deutschmark payment to Greece in 1960.

Varoufakis’ surprise trip to Washington was reportedly instigated by Lagarde after ministers began suggesting the government would prefer to pay pensions and salaries than the IMF loan – in keeping with its philosophy to support those hardest hit by the crisis. Failure to meet bondholder obligations could spark a dangerous chain reaction for a country saddled with €320bn in debt – the highest debt-to-GDP ratio in Europe. As such, Lagarde was quick to say she welcomed the news that Athens would honour the loan repayment. Reports indicated the IMF chief had also pressed Varoufakis to agree to pension cuts and raise VAT. Both are anathema to a government that has refused outright to adopt any more “recessionary” measures.

Varoufakis, who has repeatedly said a euro exit would be catastrophic for Greece, promised to break the deadlock by improving the efficacy of negotiations with creditors. “There will be topics established in order to reach deals faster and to reach better quality deals,” he told reporters. “Our government is a reformist government, we are intent upon reforming Greece deeply. This is our promise to the Greek people so having an opportunity to discuss the reform programme here at the IMF with the managing director is an excellent step towards that direction.” Yet such reforms – including the sale of state assets – will not be easy. Internal dissent within Syriza, the governing party, has peaked in recent days with far-left militants, led by the energy minister Panagiotis Lafazanis, robustly rejecting any suggestion of rolling back on pre-election pledges.

Lafazanis, a Marxist who openly supports improving ties with Moscow, controls around a third of Syriza’s MPs and could easily bring down the government by voting against reforms when they are brought before the 300-member house. With the young premier clearly at odds over how to deal with the hardliners, there is growing speculation, not least among eurozone officials, that a new bailout accord to keep the country afloat can only be achieved if Tsipras agrees to dismember his own party and join up with centrist forces to form a new coalition. That would require him also cutting links with his rapidly anti-austerity rightwing junior partner Anel.

“Either Tsipras makes the policy U-turns being demanded of him, or Greece crashes,” said Dimitris Keridis, political science professor at Panteion University. “In that sense this government cannot survive in its current form.” Piling on the pressure, the Greek parliament late on Monday began debating the need to form a committee to investigate how Greece ended up being “stripped of its sovereignty” under its bailout agreement and placed under the surveillance of the EU and IMF. Analysts believe the move will almost certainly inflame relations with Athens’ creditors further.

Eurozone authorities frustration with Greece has grown so intense that a change in the current Athens government s make-up, however far-fetched, has become a frequent topic of conversation on the sidelines of bailout talks. Many officials up to and including some eurozone finance ministers have suggested privately that only a decision by Alexis Tsipras, Greek prime minister, to jettison the far left of his governing Syriza party can make a bailout agreement possible. More The idea would be for Mr Tsipras to forge a new coalition with Greece s traditional centre-left party, the beleaguered Pasok, and To Potami (The River), a new centre-left party that fought its first general election in January. Tsipras has to decide whether he wants to be prime minister or the leader of Syriza, said one European official.

A senior official in a eurozone finance ministry added: ‘This government cannot survive’. Members of Syriza’s moderate wing admit there is a problem with the Left Platform, the official internal opposition that represents about a third of the party and controls enough MPs to bring down the government if it were to rebel in a parliamentary vote. We used to be more debating society than political party … so it is hard to get a system of party discipline up and running, said one Syriza official. But you have to remember we’ve been in power less than 100 days. Under the leadership of Panayotis Lafazanis, almost as popular a figure in the party as the prime minister, Left Platform members say they will veto structural reforms that are being pushed hard by Greece’s creditors in the current round of bailout talks.

Yet even though Mr Tsipras had adopted a more moderate stance in his dealings with Brussels and Berlin, it is too soon to expect him to risk an open clash with his left wing, according to observers in Athens. To win the support of Pasok and To Potami, Mr Tsipras would also have to dump his right-of-centre coalition partner, the nationalist Independent Greeks. It would be desirable to move to a more coherent pro-European centre-left coalition compared with this unseemly union of the radical left with the populist right, said George Pagoulatos, a professor of political economy at Athens business university. But it is premature for the moment. Eurozone officials insist they are not trying to force a change in the government sensitive to accusations the EU was complicit in ending the tenure of George Papandreou, Greece’s prime minister at the start of the eurozone crisis, and Silvio Berlusconi, the Italian premier until late 2011.

When Alexis Tsipras visits Vladimir Putin’s Kremlin on Wednesday there is a chance the Greek premier’s eastern manoeuvre will immediately bear fruit: kiwis, peaches and strawberries to be precise. Athens is hopeful that Moscow will lift a retaliatory ban on Greek soft fruits to demonstrate the abiding strength of Russo-Greek relations, just as both leaders feel a diplomatic chill with Europe over the Ukraine crisis and Athens’ bailout saga respectively. But what worries European diplomats is that the Putin-Tsipras gladhanding amounts to something more significant than fruit trade. The big fear, in the words of one suspicious senior official, is a “Trojan horse” plot, where Russia extends billions in rescue loans in exchange for a Greek veto on sanctions — a move that would kill western unity over Ukraine.

No such shock is expected this week. But as Athens nears the brink of insolvency there is growing alarm that Mr Tsipras’s radical left government might turn to Moscow in desperation. It would set off the biggest panic over Greece’s strategic alignment since the 1947 US Marshall Plan, initiated to save the country from communist fighters that Mr Tsipras’ Syriza party lionise to this day. Others argue that Mr Tsipras’ Russia card is but a ploy in bailout talks with Germany and the eurozone. In spite of historic cultural ties and Syriza’s Soviet romanticism, analysts think Greece is too tied to the west – through EU and Nato membership – and too deep in debt for sanctions-damaged Russia to buy it off as a reliable ally.

“The Greeks are using Russia as a way to piss off Berlin, to frighten them. Tsipras wants to show he has other options,” said Theocharis Grigoriadis, a Greece-Russia relations expert at the Free University of Berlin. “But he has no intention of making Greece a Russian satellite. The Russians know that. The Germans know that. It is pure theatre, a Greek game, and I’m afraid it looks like a poodle trying to scare a lion.” From his first day in office Mr Tsipras’ administration has stoked Russian paranoia in western capitals. During his debut at an EU foreign ministers meeting, Greece’s Nikos Kotzias angrily waved a rolled-up Russian sanctions proposal in his hand as he condemned the measures. “We argue and squabble but it is like a family, we’re supposed to share the same world view,” said one official present. “That meeting was something else — it felt like the UN Security Council.”

Back in the day, Chinese stocks had no greater nemesis than Hugh Hendry, whose “China Short” fund soared by 52% in 2011. The (anti) investment thesis was simple: the Chinese economy is bogged down by unprecedented overcapacity. Well, it still is, but Hugh Hendry sensed which way the wind was blowing for the last central bank left to unleash QE, and some time ago, ahead of a gargantuan, liquidity and margin-debt driven Shanghai Composite rally, the Scotsman warned, so far presciently that “To Bet Against China Is To Bet Against Central Bank Omnipotence.”

Considering that Chinese equities are the best performing market in USD terms (second only, oddly enough, to Russia) in 2015, one can see why after a disappointing 2012 and 2013, and modest 2014, Hendry has hit 2015 out of the park with a bang, generating a 10.6% return in the first two months of the year. So is Hendry still bullish on China’s stock market prospects? Why yes, and then some. But is he is contrarian just for the sake of being contrarian? Does he see something in China that nobody else does? Or is he simply right… or wrong, as the case may be? We will let readers decide. Here is his full “managers’ commentary” from his most recent letter to investors dedicated entirely to China.

So much is written about China, and of late very little has been bullish. The notion of impending renminbi devaluation has taken root as traders worry that the dollar rally has pulled its reluctant Chinese counterpart higher, especially against the euro and the yen. Indeed, it seems that shorting the renminbi has become the new equivalent to the JGB short in macro circles. But having shared these doomsday prophecies back in 2010, when the consensus was less negative, I have recently become less concerned about China. Here’s why. First China has recalibrated its growth model. Between 2001 and 2011, China had a very comparable decade to the US economy during the 1920s. Both boomed on surging productivity, high returns on capital, massive gross fixed capital formation and a fervent desire by the rest of the world to participate.

We know that both economies should have boomed; indeed they did. However I would contend that they should have boomed even more. That they didn’t was because of hawkish macro policy. In the 1920s, the Fed refused to allow the high powered money entering its economy via the gold standard to boost credit further. The Chinese discriminated against their household sector: the currency was never allowed to appreciate as much as the boom justified; wages never fully captured the dramatic gains in productivity; and real interest rates were consistently negative. Together, these measures robbed the household of anything between 5% and 7% of GDP per annum, statistically depressing income’s share of GDP and hence boosting involuntary saving. No one really complained, everyone felt better off, but they could have done even better.

For many Americans, the rise in food and housing prices is a tough squeeze. That’s because—even in an era with low overall inflation—low-income Americans spend a disproportionate share of their money on food and housing. New data from the Labor Department show the extent of the discrepancy. The bottom 10% of Americans, by income, devote 42% of their spending to housing and an additional 17% to food–nearly 60% of their total spending, according to the Consumer Expenditures Survey. By contrast, the wealthiest 10% of Americans dedicate only 31% of their spending to housing and 11% to food–closer to 40% of total spending. This underscores one reason that inflation feels different household to household: People spend their money in such different ways. A parent with children in college or daycare might scoff at the notion that inflation has been low for the last five years.

Conversely, someone with no car payment and no mortgage but who does a lot of driving may be feeling flush from the plunge in gas prices. This year, the expenditure survey added new data breaking down Americans into tenths. Approximately 12.5 million consumer units are in each tenth. In the bottom three brackets are individuals earning around $20,000 a year or less, and spending more than they bring in. The survey breaks out their sources of income. The poorest 10% receive more public assistance than any other group. The second 10% receive more than half their income from Social Security and retirement programs. The third and fourth 10% also receive large shares of their income from retirement programs, suggesting that retirees make up a large share of the lower-middle part of the income distribution.

The top half of Americans receive at least three-quarters of their income from wages and salaries. (The complete definition of the income sources is available here. The chart above combines “regular contributions for support” with “public assistance, supplemental security income and food stamps.”) The sixth through ninth decile in this survey earn between $51,000 and $112,000 a year. The top 10% earn an average of $220,000. Even among this group, the vast majority of annual income comes from wages, although they also receive 10% of their income from other sources, primarily self-employment. As consumers become wealthier, their spending patterns change, sometimes dramatically.

In the wake of March’s tepid jobs creation, it may be time to take a harder look at this soft patch. Even ahead of Friday’s employment report, concerns were mounting about a growing pile of weak data. JPMorgan’s economic research team cut their first quarter GDP growth forecast to a mere 0.6% on Thursday, citing poor consumer spending data. Recent manufacturing data have also looked especially bad, with the ISM manufacturing index’s March reading showing the slowest growth since May 2013. Separately, housing market indicators have been mixed, perhaps due to the harsh winter weather. Amid all of the concerns, many economists have held out hope because of the string of strong employment reports, which have indicated that growth remains strong where it matters most.

Now, that story changed after the Bureau of Labor Statistics reported that a mere 126,000 jobs were created in March, compared to broad expectations of another 200,00-plus report. “While the jobs report was disappointing, in some ways it confirms what we already know,” commented Marc Chandler, global head of currency strategy with Brown Brothers Harriman. “The U.S. economy slowed markedly in Q1 2015.” In the 45 minutes of futures trading that followed the report (which was released on a day when the stock market was closed for the Good Friday holiday) S&P 500 futures fell by 1%, while bond futures marched higher. In the currency market, the U.S. dollar fell sharply across the board.

While the jobs number may have somewhat shifted expectations about when the Federal Reserve will raise short-term interest rates, these moves are all consonant with shifting perceptions of the American economy—and not with shifting expectations about the Fed. After all, with all else being equal, a more dovish Fed would be good rather than bad for stocks. For Brian Stutland of Equity Armor Investments, the jobs disappointment couldn’t come at a worse time. Earnings season is around the corner, and analysts are already predicting an earnings decline. “You have to worry about whether valuations are correct if earnings are flat to down,” Stutland said. “Investors are going to freak out if earnings turn negative, and you could see a snowball effect.”

The North America Free Trade Agreement, signed in 1993, triggered an immediate surge of direct investment from the US into Mexico’s food processing industry. Between 1999 and 2004, three-quarters of the country’s foreign investment went into the production of processed foods. At the same time, sales of processed foods went up by 5-10% per year. Mexico is now one of the ten biggest producers of processed food in the world, with total sales reaching $124bn in 2012. The corporations running this business – such as PepsiCo, Nestlé, Unilever and Danone – made $28bn in profits from these sales, $9bn more than they made in Brazil, Latin America’s largest economy. Mexico is now one of the ten biggest producers of processed food in the world, with total sales reaching $124bn in 2012.

The corporations running this business – such as PepsiCo, Nestlé, Unilever and Danone – made $28bn in profits from these sales, $9bn more than they made in Brazil, Latin America’s largest economy. Mexico offers the global food industry not only low operation costs, but a network of trade agreements that provide access to big markets such as the European Union and the US. At the same time, these corporations are investing heavily in taking over local distribution. The number of supermarkets, discount chains and convenience stores exploded: in 1997, their numbers went from 700 to 3,850; there were 5,730 such stores in 2004. Today, Oxxo, a convenience store chain owned by a unit of Coca-Cola Mexico, is opening an average of three stores a day, and aims to inaugurate its 14,000th store in Mexico this year.

One of the main effects of all this has been a radical change in people’s diets and a disproportionate increase in malnutrition, obesity and diabetes. Mexico’s National Institute for Public Health reports that, between 1988 and 2012, the proportion of overweight women between the ages of 20 and 49 increased from 25% to 35.5%; the number of obese women in that age group increased from 9.5% to 37.5%. A staggering 29% of Mexican children between the ages of five and 11 were found to be overweight, as were 35% of the youngsters between 11 and 19, while one in 10 school age children suffers from anaemia.

The level of diabetes is equally troubling. The Mexican Diabetes Federation says there are up to 10 million people who suffer from diabetes in Mexico; around two million of them are unaware that they have the disease. This means that more than 7% of the Mexican population has diabetes. The incidence rises to 21% for people between the ages of 65 and 74. In 2012, Mexico ranked sixth in the world for diabetes deaths and specialists predict that there will be 11.9 million Mexicans with diabetes by 2025. Obesity and diabetes function together, interacting so strongly that a new term has emerged: “diabesity”. Who can we thank for this? The transnational food industry supported by governments that share their interests.

One might say the main effect of the 50-year-long Friedman globalism orgy was the schooling of other nations in American-style financial fraud. Surely China has now surpassed the USA, considering the structural perversities of their banking and government relations. They really don’t have to account to anybody, including themselves, and the numbers they publish must be even more fantastical than the junk statistics produced by the US BLS. Europe has been a star pupil and only a few months ago announced a Quantitative Easing (fake capital creation) program as ambitious as America’s have been. Japan, of course, is just marking time until it quietly slips away and goes medieval.

Global disintegration has advanced furthest, not surprisingly, in the fragile band of regions most strung out on the primary commodity: oil. The Middle East/North Africa/Central Asia war zone is steadily combusting, and there is no sign of resolution across the whole of it, only the promise that conflict will get worse. Saudi Arabia was the cornerstone of that district, and the senile Saudi leadership finds itself in peril as its military pretends to support splintering Yemen. The other Arabian princes of other non-Saud clans must be watching the spectacle with wonder and nausea. When Arabia blows up, that will truly be the beginning of the end. The foregoing leads to that other original question: what is that “capital” we’re counting on? I’d propose that it doesn’t exist. It is a figment engraved on the hard drives of the world, a ghost that haunts the people still in charge of that disintegrating global economy. There is still wealth in the world, but a lot less than people such as Larry Summers say there is.

Russia said only direct talks with Ukrainian authorities may change its refusal to join debt restructuring negotiations. No official contacts have taken place with Ukraine’s Finance Ministry about renegotiating $3 billion of Eurobond debt, Russian Deputy Finance Minister Sergey Storchak said in an April 3 interview in Moscow. Russia expects to be paid on time and in full when the debt matures in December, he said. “We are not going to join any offer that they are getting ready,” Storchak said. “Only one thing can influence our position — some direct contact with the debtor.” Ukraine wants to restructure all external sovereign debt incurred before March 2014 in negotiations to save $15.3 billion in public sector financing under its bailout agreement with the IMF, the Finance Ministry in Kiev said on Saturday.

Russia, the second-largest bondholder after Franklin Templeton, refuses to join restructuring talks, saying the debt it holds was official aid to Ukraine’s struggling economy under former President Viktor Yanukovych. Russia purchased $3 billion of bonds in December 2013 after Yanukovych rejected an association agreement with the European Union in favor of closer ties with the government in Moscow. He was ousted in February last year and fled Ukraine after violent clashes between police and protesters who supported the trade pact with the EU. Ukraine’s Finance Ministry “publicly invited all bondholders” through the clearing system to take part in debt negotiations, including those holding bonds issued in December 2013, the ministry said in e-mailed comments on April 6. “To date, the Ministry has not received any response through the designated website to its invitation from the holders of such bonds.”

Finance Minister Natalie Jaresko said in March that all loans and bonds should be treated the same. The debt Russia holds should be considered “official” state aid, Russian Finance Minister Anton Siluanov said on March 27. The only concession it was willing to make was not to enforce a clause providing for early repayment once Ukraine’s public debt surpassed 60% of gross domestic product, he said. Holders of Ukraine’s bonds have suffered losses of more than 40% since the beginning of 2014, the worst performance among countries in the Bloomberg USD Emerging Market Sovereign Bond Index. The bonds handed investors a 25.7% loss this year, while the index gave a return of 2.64%.

A Ukrainian-born pianist was barred from playing at Canada’s Toronto Symphony Orchestra (TSO) for expressing views on the situation in Ukraine via Twitter, according to the soloist herself. The move led to a social media storm tagged #LetValentinaPlay. The orchestra has officially announced its decision to drop pianist Valentina Lisitsa from its Rachmaninoff Concerto #2 program earlier this week. TSO President and CEO Jeff Melanson cited “ongoing accusations of deeply offensive language by Ukrainian media outlets,” adding that Lisitsa’s “provocative comments” had allegedly “overshadowed past performances.” In the statement, Melanson seems to be referring to Lisitsa’s Twitter posts, in which she expresses her views on the situation in Ukraine.

Lisitsa turned to Facebook on Monday with a plea, asking her fans for support to “tell Toronto Symphony that music can’t be silenced.” “Someone in the orchestra top management, likely after the pressure from a small but aggressive lobby claiming to represent Ukrainian community, has made a decision that I should not be allowed to play,” she wrote, referring to her TSO performances on Wednesday and Thursday. “I don’t even know who my accusers are, I am kept in the dark about it.” After expressing her views, Lisitsa claimed to have received numerous death threats. The last straw was the decision to drop her performance: “My haters didn’t stop there. Trying, in their own words, to teach me a lesson, they have now attempted to silence me as a musician.”

Lisitsa revealed that TSO offered to cover her entire fee for the canceled program, if she chose to stay silent about the reason behind the decision. “They even threatened me against saying anything about the cause of the cancellation … If they do it once, they will do it again and again, until the musicians, artists are intimidated into voluntary censorship,” she wrote. The reaction on Twitter was massive, with the hashtag #LetValentinaPlay surging in popularity and thousands of supporters speaking out. International concert violinist and recording artist Hannah Woolmer tweeted: “To me, this IS a VITAL campaign pls can all my followers retweet if they agree that @TorontoSymphony should #letvalentinaplay.”

A stone’s throw from a former palace and vestiges of a medieval wall, this four-bedroom house in rural Valencia boasts a prime location, 20 miles from the beach and 50 miles from the nearest ski hill. And it is a steal – given that its newest owner paid just €10 (£7.35) for it in a raffle. When the previous owners, the Bolumar family, first wanted to sell the house they had inherited two years ago in Segorbe, a town of 9,300, they tried to do it the traditional way, listing it for €90,000. But the struggling Spanish housing market yielded few potential buyers. “It was really complicated,” said Pepe Bolumar, 35. The family began considering other ways to sell.

Most ideas were dismissed quickly, save one. “Raffling it off seemed interesting – people would have the chance to acquire a home for a low cost and we would still end up covering the cost,” Bolumar said. From there began a year-long project, with the family wrestling their way through seemingly endless amounts of red tape to obtain authorisation from the country’s tax authorities to be the first in Spain to raffle off a house. The €10 tickets, sold from a kiosk in Valencia as well as online, offered the chance to win the 141 sq metre home, no strings attached. As news of the raffle spread through Facebook and Twitter, 32,000 tickets were sold, the majority of them in Spain but also as far away as Australia and Canada. Those in Florida, he said, seemed to be particularly taken with the idea.

“Lots of people from Florida called us, also from England,” said Bolumar. Some of the calls that came in were heartbreaking, he said, from families who had been evicted from their homes or who had fallen on tough times and were desperately hoping to win the house. As the family prepared to gather together with a notary to watch the numbered balls drop from a borrowed lottery machine, Bolumar was confident that the family had recouped the original sale price of the house, estimating it would walk away with further €10,000. “It’s less than what it appears. We didn’t receive €320,000, because we have to cover our costs of the past year,” he said, pointing to publicity as well as the cost of servers and maintenance for the website.

The family will also cover any taxes incurred by the winner from the transfer of the house. “The winner doesn’t have to pay a thing more.” Throughout the process, Bolumar said the family regularly received phone calls from others interesting in raffling off their own houses. It now plans on keeping its website open to offer guidance to others looking to do the same. “It was a huge amount of effort. It took up a whole year and became a second job for me,” said Bolumar, who manages a small business in Valencia. But it proved to be an effective way to beat the tumbling Spanish property market, he said. “If you’re trying to sell your home and its not working, this might be the solution for you.”

Fonterra’s half-year result – which revealed a 16% profit drop and a cut to the forecast dividend – was a disappointment for farmers and investors in the co-operative’s listed shareholders’ fund. But an aspect of the interim financials that didn’t get much attention last week was the precipitous decline in Chinese revenue the company experienced in the six months to January 31. Sales in Fonterra’s largest market slumped to $1.2 billion from $3.1 billion in the same period a year earlier. That’s a whopping 61% decline, well ahead of the next biggest geographical revenue fall of 29% in Europe. It underlines the extreme volatility Fonterra has been dealing with in China and the ongoing challenges it faces there.

Aggressive Chinese buying during the latter part of 2013, into early 2014, helped to inflate global dairy prices and resulted in a massive build-up of inventory in China. To put it in perspective, the $3.1 billion Chinese revenue Fonterra posted for the six months to the end of January 2014 was a 138% increase on the $1.3 billion it reported for the half-year up to January 2013. But the spike in demand wasn’t to last. High inventory levels had put the brakes on Chinese buying by the middle of last year. That drop in demand has been a factor in the dairy price downturn New Zealand farmers are now facing.

Speaking to the Business Herald last week, Fonterra chief financial officer Lukas Paravicini attributed the half-year slump in Chinese revenue to a combination of lower dairy prices, which were a negative for the co-op’s ingredients business, and weak demand. It appears the latter factor was the biggest contributor to the decline. Fonterra’s half-year revenue across the rest of Asia fell only 5%, to $2.6 billion, despite falling dairy prices. So when might Chinese demand return to normal? Paravicini expressed some optimism, saying Fonterra’s core ingredients business in China had experienced “a bit” of a recovery. “We’re still in a supply-rich and demand-weak environment and that includes China,” he said.

Some 1,500 migrants have been rescued from boats trying to cross to Italy in the space of 24 hours, the Italian coastguard has said. The navy and coastguard despatched vessels to rescue the migrants from five different boats. The UNHCR says almost 3,500 people died and more than 200,000 were rescued trying to cross the Mediterranean Sea to reach Europe last year. The chaotic political situation in Libya has added to the crisis. The coastguard despatched four vessels and the navy another after receiving satellite telephone distress calls from three migrant boats. Two more boats were found to be in trouble when the rescuers arrived. The migrants were transferred to Lampedusa island and the ports of Augusta and Porto Empedocle in Sicily. Last year, Italy dealt with 170,000 migrants who entered the EU by sea. Officials say the numbers for the first two months of this year are up 43% on January and February in 2014.

As government websites go, the U.S. Drought Portal sounds full of promise. Fun even. But alas, recent news from the site’s weekly reports on things like U.S. drought conditions and wildfire risks, has been anything but fun.